Nvidia has been a great investment over the past few years, and I still think it's a great stock pick now. However, many investors are looking for alternatives or new ways to invest in the artificial intelligence (AI) space, and I think I've identified one that has been an absolute winner over the past year.
Micron (MU +4.60%) stock was up nearly 300% over the past year, although it has taken a bit of a break over the past few days. I think this stock looks like an excellent investment now, and the recent sell-off gives investors the perfect buying opportunity to get into this stock that could be a massive long-term winner.
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Micron cannot meet demand
AI computing units have countless components that allow them to function. One of the most important is memory, which allows the computing unit to access stored information quickly. Without memory capacity, these chips don't function as effectively.
AI computing chips utilize a specific type of memory, known as high-bandwidth memory (HBM). Demand for this type is rapidly growing, and Micron expects the total HBM market opportunity to expand from $35 billion in 2025 to $100 billion by 2028.
The problem is, Micron cannot meet total demand right now. During its last conference call, Micron's management told investors that they only have enough capacity to meet between half and two-thirds of total demand. That's a big deal, and until Micron can get more production capacity up and running in 2027, there will continue to be a huge bottleneck. Even after increased capacity is up, there still may be a bottleneck due to rising computing unit demand.
NASDAQ: MU
Key Data Points
One recent breakthrough that caused Micron's stock to sell off is Alphabet's Google's TurboQuant algorithm. This reduces memory demand by six times, which at a glance may seem it destroys the Micron investment thesis.
However, this is only reducing memory demand on one part of the large language model. Furthermore, with this new innovation, companies may be free to improve their AI models because there is no memory crunch anymore. As a result, demand for memory will still be present; it will just be utilized in a different capacity.
Next quarter, Micron expects $33.5 billion in revenue, up from $23.9 billion this quarter and $13.6 billion the quarter before that. Micron is on an unreal growth trajectory, and with memory demand being in a large, multiyear rise, I think Micron is an excellent stock to invest in right now.
