Micron Technology (MU -5.12%) has risen to become the 11th largest company in the world by market cap, as of this writing, driven by the terrific demand for its memory chips that power several applications ranging from artificial intelligence (AI) data centers to smartphones to personal computers (PCs).
Micron currently has a market cap of $1.12 trillion. It can become significantly larger in the future amid the ongoing memory supply shortage, driven by booming demand for memory chips from AI data centers. However, I think there are a couple of companies capable of overtaking Micron's market cap over the next five years, thanks to their solid positions in their industries and robust growth potential.
Let's take a closer look at these two names.
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Advanced Micro Devices: Multiple growth opportunities could send this stock flying higher
Advanced Micro Devices (AMD +0.80%) is the 16th largest company in the world with a market cap of $970 billion, which is 15% lower than Micron's as of this writing. AMD, therefore, isn't very far from overtaking Micron.
NASDAQ: AMD
Key Data Points
Importantly, AMD's growth has been accelerating due to strong demand for its chips in AI data centers and PCs. The company's second-quarter revenue increased by 50% year over year to $11.5 billion, while non-GAAP earnings rose 246% to $1.66 per share. The majority of this growth was driven by the data center business, where strong demand for AMD's graphics accelerators and server processors led to a 107% jump in revenue to $6.7 billion.
Looking ahead, AMD has strong catalysts that can help sustain its impressive growth. The first is the data center business, where it should be able to capitalize on a $2 trillion total addressable market (TAM) for AI compute chips by 2030. The chip designer has been rapidly gaining share in the server processor market, controlling 34.5% of this space at the end of the second quarter, up from 27.3% in the year-ago period, according to Mercury Research.
Meanwhile, AMD's share of data center graphics processing units (GPUs) is projected to rise from around 6%-8% in 2025 to 7%-10% this year, according to various third-party estimates compiled by semiconductor industry intelligence provider Silicon Analysts. Importantly, AMD has other major catalysts up its sleeve, including the gaming business, that could make it a significantly larger company by 2030, potentially catapulting it into the $3 trillion club.
Another point worth noting is that analysts have become more bullish on AMD's long-term earnings prospects relative to Micron's.
Data by YCharts
All this indicates that AMD indeed has the potential to overtake Micron and become bigger over the next five years.
SK Hynix: A bigger memory company than Micron that trades at a cheaper valuation
South Korean memory giant SK Hynix (SKHY -3.76%) has a market cap of $780 billion, which is 43% lower than Micron's. There are two reasons why I think SK Hynix can bridge this gap and overtake Micron over the next five years.
NASDAQ: SKHY
Key Data Points
The first is SK Hynix's market share in memory chips. It reportedly controlled 25% of the dynamic random-access memory (DRAM) market in the second quarter, according to Counterpoint Research. Though that was only slightly higher than Micron's 24%, investors will do well to note that SK Hynix controls a much larger 50% share of the fast-growing high-bandwidth memory (HBM) market. Micron's share of this niche stands at just 18%.
Also, SK Hynix's share of the NAND flash market is 19%, higher than Micron's 15%. The stronger market share helps explain why analysts expect SK Hynix to deliver long-term earnings-per-share growth of 82%, according to YCharts. That's higher than the 65% long-term growth projected for Micron, as seen earlier in the article.
The second reason why SK Hynix could be worth more than Micron over the next five years is that it trades at just 11 times earnings, well below Micron's earnings multiple of 25. It should ideally be trading at a premium given its stronger market share and higher earnings growth potential. Not surprisingly, SK Hynix has multibagger potential given the healthy earnings growth it can deliver.
Data by YCharts
Assuming its earnings per share reach $44.63 in 2028 and it trades at even 15 times earnings then, its stock price could reach $669. That's 4x SK Hynix's stock price right now, suggesting that it could easily be worth more than Micron in the next five years.
