Nvidia (NVDA 1.59%) has played a pioneering role in the proliferation of artificial intelligence (AI) technology with the help of its graphics processing units (GPUs), which are being deployed in data centers to train large language models (LLMs) such as ChatGPT, leading to tremendous growth in the company's revenue and earnings.
As a result, shares of Nvidia have set the market on fire in the past year, nearly tripling in value. This explains why Nvidia stock is now trading at an expensive 72 times trailing earnings. However, there is another company that is witnessing a terrific jump in revenue and earnings thanks to the growing adoption of AI, and it is much cheaper than Nvidia.
NASDAQ: NVDA
Key Data Points
Micron Technology (MU 3.82%) released its fiscal 2024 third-quarter results (for the three months ended May 30) on June 26, and the company reported a big jump in revenue and earnings. Let's see how AI is supercharging Micron's growth and check if it is a better AI stock to buy right now over Nvidia.
Micron Technology is stepping on the gas
Micron's fiscal Q3 revenue increased an impressive 81% year over year to $6.8 billion. More importantly, its non-GAAP (generally accepted accounting principles) net income for the quarter came in at $0.62 per share, as compared to a loss of $1.43 per share in the same quarter last year. The memory specialist's guidance indicates that its growth is set to accelerate.
More specifically, Micron is expecting $7.6 billion in revenue in the current quarter, at the midpoint of its guidance range. That would be a 90% increase over its top line in the same period last year, which means that it is set to grow at a faster pace in the current quarter. The midpoint of the company's earnings guidance of $1.08 also points toward a major turnaround from a loss of $1.07 per share in the year-ago period.
Micron's robust growth can be attributed to healthy demand for memory chips from multiple areas such as smartphones, personal computers (PCs), and data centers, all of which are getting an AI-powered boost.
NASDAQ: MU
Key Data Points
For instance, in the data center business, Micron sold $100 million worth of high-bandwidth memory (HBM) chips last quarter. These HBM chips are used in AI graphics cards to provide greater bandwidth and computing power. The good part is that Micron is expecting its HBM revenue to increase from "several hundred million dollars" in the current fiscal year to "multiple billions of dollars in revenue" in fiscal 2025.
HBM will be a long-term growth driver for Micron, thanks to healthy demand for AI graphics cards. Additionally, Micron's data center storage business is also getting a boost thanks to growing demand for AI training and inference, which has led to an increase in demand for solid-state drives (SSDs). This, again, presents a secular growth opportunity for Micron, as the global data center SSD market is expected to generate $133 billion in revenue in 2032, as compared to $37 billion last year.
Meanwhile, AI is also set to drive stronger demand for memory chips in the smartphone and PC markets. On its latest earnings conference call, Micron management pointed out that AI-enabled PCs are expected to "have 40% to 80% more DRAM content than today's average PC." The company adds that these PCs are likely to be equipped with bigger storage capacities as well.
As for smartphones, Micron says that AI-enabled smartphones this year are carrying 50% to 100% more dynamic random access memory (DRAM) compared to last year's flagship phones. Thanks to these catalysts, it won't be surprising to see the global memory market's revenue indeed increasing to $321 billion in 2030 from $193 billion last year, per Fairfield Market Research.
All this explains why analysts are forecasting Micron to grow at a terrific pace in the coming years, even outpacing Nvidia's estimated growth.
Buying this memory stock over Nvidia looks like a no-brainer
Micron finished its previous fiscal year with revenue of $15.5 billion. It is expected to finish the current fiscal year with $25 billion in revenue, which would be a 61% increase over the prior year. Nvidia's top line, on the other hand, is expected to jump from $60.9 billion in the previous fiscal year to $120 billion in the current one. So Nvidia is expected to clock faster growth than Micron this year.
However, as the chart indicates, Micron's revenue could jump another 50% in the next fiscal year, which would be well ahead of Nvidia's forecasted growth.
MU Revenue Estimates for Next Fiscal Year data by YCharts
What's more, Micron's earnings are expected to grow at a much faster pace than Nvidia's over the next couple of fiscal years.
MU EPS Estimates for Current Fiscal Year data by YCharts
Given that Micron Technology is trading at just 19 times forward earnings, which is a massive discount to Nvidia's forward earnings multiple of 48, it looks like a no-brainer AI stock to buy right now, as it is not just significantly cheaper, but also has the potential to outperform its illustrious peer.
