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2 Tech Stocks to Buy Now on the Dip for AI Growth: MU and AMD
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The stock market barely budged after July’s cool inflation print on Wednesday. The Nasdaq got stuck below its 21-day moving average, which could provide near-term resistance following the rapid rebound off the tech-heavy index’s 200-day.
Some Wall Street traders are calling for choppiness over the next few months heading into the presidential election. The stock market might also experience more near-term selling amid increased volatility, coupled with the fact that many tech stocks are up well over 20% YTD.
Image Source: Zacks Investment Research
Thankfully, the two biggest market drivers—interest rates and earnings—remain bullish tailwinds, meaning the bulls will likely buy up any significant pullbacks.
Today we explore two great large-cap technology stocks—Micron (MU - Free Report) and Advanced Micro Devices (AMD - Free Report) —trading at least 30% below their highs that investors might want to buy for long-term upside across artificial intelligence and beyond.
Buy Micron Technology, Inc. (MU - Free Report) Stock Down 33% from its Peaks?
The basic pitch: Micron ((MU - Free Report) ) is a semiconductor company benefitting from the AI boom poised to do over 50% sales growth in FY24 and FY25, trading 33% below its all-time highs.
Micron is a memory chip titan, with a growing portfolio of DRAM and NAND offerings. Micron grew alongside the rapid expansion of PCs, smartphones, data centers, and more. Micron also talked about its artificial intelligence growth potential for years. MU is finally in its AI super-cycle.
MU is rolling out chips designed to support the heavy workloads required at AI data centers. Micron is also actively expanding its manufacturing footprint, pumping billions of dollars in capex to build cutting-edge memory fabs in the U.S.
Image Source: Zacks Investment Research
Micron expects the AI arms race will drive record demand for memory chips. MU grew its Q3 FY24 sales (reported in late June) by 82%. AI demand drove 50% sequential data center revenue growth and record high data center revenue mix. Micron expects to post record revenue in FY25, fueled by “robust AI demand.”
MU is projected to grow its revenue by 60% in FY24 and another 55% in FY25 to reach $38.63 billion—crushing FY22’s $30.76 billion record. On the bottom-line, Micron is projected to swing from an adjusted loss of -$4.45 per share last year to $1.16 in FY24 and skyrocket 700% in FY25 to reach $9.32 per share.
Micron’s FY24 consensus earnings estimate surged 26% since its Q3 release, with FY25’s consensus 15% higher. Micron’s upbeat EPS outlook helps it earn a Zacks Rank #2 (Buy). Micron’s robust balance sheet supports its growth efforts and its dividend payout.
Image Source: Zacks Investment Research
Micron shares doubled the Zacks Tech sector over the past 15 years. MU is also up 42% during the trailing three months to outpace Tech’s 20%, including Micron’s 33% fall from its June peaks. MU stock’s average Zacks price target offers 66% upside from its current price.
Micron stock found support on Wednesday near its previous highs from 2021 and 2022 (see nearby chart). Along with its discounted price, Micron trades at a 55% discount to the Zacks Tech sector and over 60% below its various highs during the last 10 years at 11.6X forward 12-month earnings.
Time to Buy Advanced Micro Devices (AMD - Free Report) Stock for Long-Term Upside?
The basic pitch: Advanced Micro Devices ((AMD - Free Report) ) is attempting to gain AI chip market share against its GPU competitor and industry powerhouse Nvidia ((NVDA - Free Report) ). AMD, which is projected to grow its adjusted earnings by 26% this year and 54% next year, has tumbled over 30% from its March highs.
Advanced Micro Devices is a standout player in the GPU and CPU industries. AMD’s key GPU segment grew alongside the rapid expansion of the gaming industry, data centers, and beyond over the past 10 years. AMD grew its revenue from around $4 billion in FY15 to nearly $23 billion last year.
AMD remains far behind AI chip leader Nvidia. Thankfully, the AI pie is massive and AMD is benefitting immensely from the same AI megatrends as Nvidia. AMD acquired Silo AI—the largest private AI lab in Europe—on August 12 in a $665 million all-cash deal to “accelerate development and deployment of AI models on AMD hardware.”
Image Source: Zacks Investment Research
AMD topped our Q2 EPS estimate on July 30. AMD provided slightly downbeat guidance, extending its streak of downward revisions.
Still, AMD is projected to post 13% revenue growth in 2024 and 26% higher sales next year to soar from $22.68 billion in 2023 to $32.18 billion in FY25. Plus, AMD is projected to boost its adjusted earnings by 26% this year and 52% next year.
AMD is going all in on AI to help take advantage of the long-term growth potential. “The rapid advances in generative AI are driving demand for more compute in every market, creating significant growth opportunities as we deliver leadership AI solutions across our business,” CEO Dr. Lisa Su said in prepared remarks.
AMD shares have skyrocketed 3,300% in the past 10 years to destroy Tech’s 300% and the Zacks Semiconductor market’s 920%. AMD has lagged the chip market over the last three years, with the stock down 5% YTD and 33% from its early March records.
Image Source: Zacks Investment Research
AMD is trying to find support near its 21-month moving average. The stock is also trading at some of its most oversold RSI levels over the past 10 years, while trading between its 21-week and 50-week. Buyers also appear to be trying to prevent AMD from sliding much further below its 2021 highs.
AMD trades at a 45% discount to its five-years highs at 38.5X forward 12-month earnings, putting it right near the Zacks Semiconductor Market. The stock’s PEG ratio, which factors in long-term earnings growth, offers a slight discount to Tech and 82% value compared to AMD’s recent highs.
AMD might be the Pepsi to Nvidia’s Coca-Cola in the AI chip market. But being No. 2 is still a fantastic place to be.
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2 Tech Stocks to Buy Now on the Dip for AI Growth: MU and AMD
The stock market barely budged after July’s cool inflation print on Wednesday. The Nasdaq got stuck below its 21-day moving average, which could provide near-term resistance following the rapid rebound off the tech-heavy index’s 200-day.
Some Wall Street traders are calling for choppiness over the next few months heading into the presidential election. The stock market might also experience more near-term selling amid increased volatility, coupled with the fact that many tech stocks are up well over 20% YTD.
Image Source: Zacks Investment Research
Thankfully, the two biggest market drivers—interest rates and earnings—remain bullish tailwinds, meaning the bulls will likely buy up any significant pullbacks.
Today we explore two great large-cap technology stocks—Micron (MU - Free Report) and Advanced Micro Devices (AMD - Free Report) —trading at least 30% below their highs that investors might want to buy for long-term upside across artificial intelligence and beyond.
Buy Micron Technology, Inc. (MU - Free Report) Stock Down 33% from its Peaks?
The basic pitch: Micron ((MU - Free Report) ) is a semiconductor company benefitting from the AI boom poised to do over 50% sales growth in FY24 and FY25, trading 33% below its all-time highs.
Micron is a memory chip titan, with a growing portfolio of DRAM and NAND offerings. Micron grew alongside the rapid expansion of PCs, smartphones, data centers, and more. Micron also talked about its artificial intelligence growth potential for years. MU is finally in its AI super-cycle.
MU is rolling out chips designed to support the heavy workloads required at AI data centers. Micron is also actively expanding its manufacturing footprint, pumping billions of dollars in capex to build cutting-edge memory fabs in the U.S.
Image Source: Zacks Investment Research
Micron expects the AI arms race will drive record demand for memory chips. MU grew its Q3 FY24 sales (reported in late June) by 82%. AI demand drove 50% sequential data center revenue growth and record high data center revenue mix. Micron expects to post record revenue in FY25, fueled by “robust AI demand.”
MU is projected to grow its revenue by 60% in FY24 and another 55% in FY25 to reach $38.63 billion—crushing FY22’s $30.76 billion record. On the bottom-line, Micron is projected to swing from an adjusted loss of -$4.45 per share last year to $1.16 in FY24 and skyrocket 700% in FY25 to reach $9.32 per share.
Micron’s FY24 consensus earnings estimate surged 26% since its Q3 release, with FY25’s consensus 15% higher. Micron’s upbeat EPS outlook helps it earn a Zacks Rank #2 (Buy). Micron’s robust balance sheet supports its growth efforts and its dividend payout.
Image Source: Zacks Investment Research
Micron shares doubled the Zacks Tech sector over the past 15 years. MU is also up 42% during the trailing three months to outpace Tech’s 20%, including Micron’s 33% fall from its June peaks. MU stock’s average Zacks price target offers 66% upside from its current price.
Micron stock found support on Wednesday near its previous highs from 2021 and 2022 (see nearby chart). Along with its discounted price, Micron trades at a 55% discount to the Zacks Tech sector and over 60% below its various highs during the last 10 years at 11.6X forward 12-month earnings.
Time to Buy Advanced Micro Devices (AMD - Free Report) Stock for Long-Term Upside?
The basic pitch: Advanced Micro Devices ((AMD - Free Report) ) is attempting to gain AI chip market share against its GPU competitor and industry powerhouse Nvidia ((NVDA - Free Report) ). AMD, which is projected to grow its adjusted earnings by 26% this year and 54% next year, has tumbled over 30% from its March highs.
Advanced Micro Devices is a standout player in the GPU and CPU industries. AMD’s key GPU segment grew alongside the rapid expansion of the gaming industry, data centers, and beyond over the past 10 years. AMD grew its revenue from around $4 billion in FY15 to nearly $23 billion last year.
AMD remains far behind AI chip leader Nvidia. Thankfully, the AI pie is massive and AMD is benefitting immensely from the same AI megatrends as Nvidia. AMD acquired Silo AI—the largest private AI lab in Europe—on August 12 in a $665 million all-cash deal to “accelerate development and deployment of AI models on AMD hardware.”
Image Source: Zacks Investment Research
AMD topped our Q2 EPS estimate on July 30. AMD provided slightly downbeat guidance, extending its streak of downward revisions.
Still, AMD is projected to post 13% revenue growth in 2024 and 26% higher sales next year to soar from $22.68 billion in 2023 to $32.18 billion in FY25. Plus, AMD is projected to boost its adjusted earnings by 26% this year and 52% next year.
AMD is going all in on AI to help take advantage of the long-term growth potential. “The rapid advances in generative AI are driving demand for more compute in every market, creating significant growth opportunities as we deliver leadership AI solutions across our business,” CEO Dr. Lisa Su said in prepared remarks.
AMD shares have skyrocketed 3,300% in the past 10 years to destroy Tech’s 300% and the Zacks Semiconductor market’s 920%. AMD has lagged the chip market over the last three years, with the stock down 5% YTD and 33% from its early March records.
Image Source: Zacks Investment Research
AMD is trying to find support near its 21-month moving average. The stock is also trading at some of its most oversold RSI levels over the past 10 years, while trading between its 21-week and 50-week. Buyers also appear to be trying to prevent AMD from sliding much further below its 2021 highs.
AMD trades at a 45% discount to its five-years highs at 38.5X forward 12-month earnings, putting it right near the Zacks Semiconductor Market. The stock’s PEG ratio, which factors in long-term earnings growth, offers a slight discount to Tech and 82% value compared to AMD’s recent highs.
AMD might be the Pepsi to Nvidia’s Coca-Cola in the AI chip market. But being No. 2 is still a fantastic place to be.