Nvidia (NASDAQ: NVDA) seems set to end another year with remarkable gains, having shot up over 150% in 2024 following a stellar performance last year. The semiconductor giant’s prospects look promising, driven by robust demand for its AI chips, especially the upcoming Blackwell processors experiencing a supply-demand imbalance as we approach 2025. This positive trajectory will likely fuel continued growth in revenue and earnings, propelling the stock further into the market stratosphere.
Yet, investors cautious of Nvidia’s lofty valuation may seek alternative avenues to ride the AI wave. With a trailing earnings multiple of 59, Nvidia outpaces the Nasdaq-100 index’s multiple of 32. While Nvidia’s healthy financial metrics may somewhat justify its valuation, risk-averse investors may fancy more affordable options elsewhere.
Why Consider Micron Technology?
Micron Technology (NASDAQ: MU), a memory chip manufacturer catering to customers like Nvidia, has reaped the benefits of soaring demand for AI GPUs, driving remarkable growth in sales of its high-bandwidth memory (HBM) chips utilized in these units.
For Q4 FY 2024 ending on Aug. 29, Micron Technology witnessed a staggering 93% year-over-year revenue surge to $7.75 billion. Additionally, the chipmaker managed to achieve a non-GAAP profit of $1.18 per share, a stark contrast to a loss of $1.07 per share in the corresponding quarter last year.
Micron’s growth story continues into the near term, with the company anticipating a $8.7 billion revenue haul for the current quarter, marking an 84% surge from the previous year. While Nvidia expects an 80% revenue boost in the same period, Micron’s relatively modest valuation presents an attractive proposition for investors.
Furthermore, Micron stands to benefit from burgeoning AI adoption beyond data center memory, with generative AI’s integration in smartphones and PCs opening up new revenue streams. The company anticipates significant upticks in the demand for its HBM chips, predicting a market expansion from $4 billion in 2023 to $25 billion in 2025.
Micron’s AI-related growth drivers position the company favorably, with bottom-line forecasts soaring from $1.30 per share in FY 2024 to lucrative projections over the coming years, making it a compelling choice for investors wary of Nvidia’s current valuation.
What About Taiwan Semiconductor Manufacturing?
Taiwan Semiconductor Manufacturing (NYSE: TSM), also known as TSMC, operates as the world’s largest foundry, producing chips for leading chipmakers and consumer electronics firms, including Nvidia. TSMC’s advanced process nodes have been instrumental in Nvidia’s AI chip dominance, enabling the production of high-performance and energy-efficient chips.
Nvidia’s success in the AI chip market owes much to TSMC’s technological prowess, with the latter’s 7nm and 4nm process nodes facilitating the fabrication of industry-leading GPUs. The overwhelming demand for TSMC’s advanced chip packaging has seen its capacity booked out till 2025, attributable to clients like Nvidia and AMD leveraging its facilities for AI processors.
Eager to meet the burgeoning demand, TSMC is ramping up its production capacity significantly, aiming to reach between 45,000 and 50,000 units per month by the end of 2024 as opposed to the 15,000 units per month in 2023. The expanded capacity bodes well for fulfilling orders from AI chipmakers and key clients like Apple, underpinning optimistic earnings forecasts for the near term.