Many tech stocks are soaring sky-high in early 2025. The artificial intelligence (AI) boom that started about two years ago is going strong. The economy has fared better recently, giving fast-growing companies better access to low-cost financing. And many of last year's top performers are coming back from a sharp price drop in 2022, when the inflation crisis was in full swing and the ChatGPT revolution hadn't started.
But some tech stocks never got the memo about soaring in 2024. They just continued to improve their business prospects with or without investor support. As a result, I see a few incredible values in the tech sector right now. In particular, you should consider grabbing a few shares of Micron Technology (MU +3.41%) and Roku (ROKU +0.38%) these days.
NASDAQ: MU
Key Data Points
1. Micron
Memory chip maker Micron plays a very active part in the AI craze.
The machines that train and operate large language models (LLMs) like ChatGPT need high-powered processors from companies like Nvidia (NVDA +1.13%) or Advanced Micro Devices (AMD +0.19%), but that's not the whole story. The same systems require massive amounts of high-speed RAM and long-term storage NAND memory. The AI accelerators from Nvidia and AMD also hold large amounts of both memory types. And when you buy a modern smartphone with built-in AI functions, that device also needs much more memory than the previous generation.
I could name many more drivers of huge demand for memory chips, but the AI trend is at the top of the list. The new class of high-bandwidth memory (HBM) represented a total addressable market (TAM) of $16 billion last year. That revenue opportunity is expected to quadruple over the next three years, growing even further to $100 billion in 2030.
"This HBM growth will be transformational for Micron, and we are excited about our industry leadership in this important product category," Micron CEO Sanjay Mehrotra said in last month's first-quarter earnings call. "We expect to be a leading supplier of HBM with the most robust, trusted, and industry-leading technology roadmap and execution record."
Indeed, Nvidia's latest and greatest AI accelerators are shipping with many gigabytes of Micron's HBM3E memory. The company will soon ramp up production of a next-generation HBM4 product line, offering 50% higher performance and significantly lower electric power consumption than the previous generation.
Data collected from Google Finance on Jan. 24, 2025. Chart by author.
So, Micron is positioned for fantastic business growth over the next few years. This is an upswing in a very cyclical industry, where the top three chip suppliers (including Micron) keep adjusting to very different end-user demand from year to year.
Micron's stock enjoyed a large jump in 2023, but that was just a bounce off the bottom of a harsh low point for semiconductors in general. The 2022 inflation crisis was concurrent with a global shortage of chipmaking facilities and materials, harking back to side effects of the COVID-19 pandemic. Last year's chart should have continued Micron's positive trend, but the stock ended 2024 almost exactly where it started.
The cyclical rebound will continue this year, boosted by fresh chip demand from the AI market and other consumer-facing trends. Micron expects its slim profit margins to widen, cutting the stock's price-to-earnings (P/E) ratio from 30 times trailing earnings to 9 times next-year estimates.
That's a bargain in my eyes.
NASDAQ: ROKU
Key Data Points
2. Roku
Media-streaming technology developer Roku may not look cheap at first glance. The company has not been profitable in recent years, with negative operating income and modest revenue growth over the last four quarters. So, the profit-based valuation metrics don't apply, and analysts don't even anticipate positive earnings in 2025. I mean, even the most bullish analyst firm writes that target in red ink.
Roku's stock chart makes sense if you stop your Roku analysis right there. The shares are down 11% over the last year and are changing hands at the bargain-basement valuation of 3.0 times trailing sales.
But that's far from the whole story.
I'm talking about a firmly established leader in the North American market for media-streaming hardware and software platforms. Without Roku's user-friendly interface, streaming media services from the likes of Netflix (NFLX 1.43%), Walt Disney, and Warner Bros Discovery would be limited to websites and smartphone apps. Those big, beautiful living room screens wouldn't be a replacement for going to the movie theater anymore. I mean, there are other names in this race, but Roku's polished user experience holds a truly dominant market share.
The next step is to expand this North American dominion worldwide. Roku is off to a great start in Latin America and making headway in a few European countries. But it's still early, and Roku doesn't even include international sales in its quarterly business reports yet. At the same time, Netflix collects 56% of its quarterly revenues from overseas markets -- the global market is already significant.
Data collected from Google Finance on Jan. 24, 2025. Chart by author.
At the same time, the inflation crisis started a deep downturn in the digital advertising sector. Why spend big money on effective but expensive marketing campaigns when people aren't ready to go shopping? I can't wait to see Roku enjoying the upside of that situation as shoppers return to normal spending patterns and advertisers want to buy ad space again.
Just like Micron, Roku looks dramatically undervalued in January 2025.
