Artificial intelligence (AI) infrastructure continues to be one of the hottest areas in the market right now. Let's look at two hot AI stocks to buy this month.
1. Micron: A DRAM leader
NASDAQ: MU
Key Data Points
The memory market is on fire, and Micron (MU +3.08%) is one of the biggest beneficiaries of this trend. The company is a leader in DRAM (dynamic random access memory), while it also participates in the NAND (flash memory) market.
Micron is one of a trio of companies, along with Samsung and SK Hynix, that dominate the DRAM industry. Meanwhile, a specialized form of DRAM called high-bandwidth memory (HBM) has become an integral part of the AI infrastructure build-out. In order for graphics processing units (GPUs) and other AI chips to perform at their best, they need to be packaged with HBM to quickly store, recover, and transmit data. With demand for AI chips soaring, so is the need for HBM.
At the same time, HBM is much more complex to manufacture and requires up to 3 to 4 times the wafer capacity of ordinary DRAM. With DRAM makers putting much of their efforts into HBM, this is leading to an overall DRAM shortage, which is drastically pushing up prices. This has led to huge revenue growth and gross margin expansion for Micron. Last quarter, its revenue surged 59%, while its gross margin increased from 38.4% a year ago to 56%.
While Micron is boosting its capital expenditures (capex) to increase capacity, given the growth of the AI infrastructure market, HBM and DRAM supply are likely to remain tight into the foreseeable future, hugely benefiting the company.
Image source: Getty Images.
2. Sandisk: A NAND pure play
For investors looking to benefit from the ongoing supply shortages in the NAND market, Sandisk (SNDK +3.85%) is the stock to buy. Similar to the DRAM market, the NAND market is also in short supply, and AI infrastructure is causing demand to grow.
NASDAQ: SNDK
Key Data Points
The NAND market was in disarray just a few short years ago, with prices falling to below the cost to make flash memory. This led many of the big memory makers to shift production to DRAM, just before AI infrastructure started to need huge, high-performance solid-state drives (SSDs) with flash memory to store training data. Today, the flash memory market has a huge supply shortage, and with HBM in focus, there isn't a rush to add new NAND supply.
This is greatly benefiting Sandisk, which, similar to Micron, is seeing its revenue surge and gross margin balloon. Last quarter, its revenue soared 76%, while its gross margin climbed from 32.3% to 50.9%. With the flash memory supercycle showing no signs of ending, Sandisk is the stock to own to play this trend.
