This artificial intelligence (AI) stock trades at just 22 times earnings -- and it's growing fast

Is This AI Stock the Unsung Hero of Your Portfolio?

In the burgeoning landscape of artificial intelligence, many top-tier AI companies command hefty valuations. Giants like Nvidia and Broadcom, along with software innovators such as Palantir and SoundHound AI, require significant premiums from investors looking to enter the AI space. However, a remarkable opportunity often flies under the radar: Micron Technology (NASDAQ: MU). This memory chip powerhouse not only boasts an incredibly attractive valuation but is also poised for explosive growth, making it a compelling candidate for your investment consideration.

Key Reasons to Look at Micron Now

Micron Technology stands out for several critical reasons, promising substantial returns for astute investors:

• Projected Earnings Explosion: Analysts anticipate a six-fold increase in Micron's earnings for the current fiscal year, followed by an additional 54% jump in the next. This meteoric rise is driven by soaring memory prices and overwhelming demand fueled by AI applications across various sectors.
• Exceptional Value: Despite its rapid growth trajectory, Micron stock trades at just 22 times earnings. This is a significant discount when compared to the broader U.S. technology sector's average earnings multiple of 51.
• Undervalued by Growth Potential: The stock's Price/Earnings-to-Growth (PEG) ratio stands at an impressive 0.15, based on its five-year projected earnings growth. A PEG ratio below 1 typically indicates that a stock is undervalued relative to its future growth potential, suggesting that Micron is an undeniable bargain.

The AI Fueling Micron's Growth Engine

Micron Technology manufactures the essential memory and storage chips that power the AI revolution. Its products are integral to AI graphics cards, personal computers, and smartphones, making the company a direct beneficiary of the secular growth in AI hardware. The demand for advanced memory solutions is unprecedented, and Micron is strategically positioned to capitalize on this trend.

High-Bandwidth Memory (HBM) for Data Centers

A significant driver of Micron's growth is High-Bandwidth Memory (HBM). AI chips, particularly those used in data centers, require vast amounts of HBM due to its superior bandwidth and lower latency. These properties are crucial for efficiently handling demanding AI workloads, allowing rapid data transfer. Micron has cultivated deep relationships with virtually every major HBM customer, including the top four AI chipmakers that produce GPUs and custom AI processors.

The HBM market is experiencing exponential growth. Micron estimates that HBM revenue could nearly double in 2025, reaching $35 billion, and is projected to skyrocket to $100 billion by 2030. Should Micron maintain its reported goal of capturing a quarter of this market, HBM alone could contribute an estimated $25 billion to its revenue within five years. This represents a substantial boost, considering the company's trailing 12-month revenue was just under $34 billion.

Expanding Reach in PCs and Smartphones

Beyond data centers, the increasing integration of AI features into everyday devices is driving up demand for memory in personal computers and smartphones. The average dynamic random-access memory (DRAM) content in these devices is on the rise, directly benefiting memory chip manufacturers like Micron. The mobile DRAM market, for instance, is projected for a six-fold expansion over the next decade, potentially generating over $636 billion in revenue. This surge is attributed to AI and machine learning applications demanding greater compute memory in smartphones.

Dominance in Data Center SSDs

Micron also holds a strong position in the data center solid-state drive (SSD) market, where it was the second-largest player in the first quarter. This market segment is also poised for immense expansion, with forecasts indicating over a seven-fold increase by 2033 from last year's levels. This diverse set of growth catalysts underscores Micron's long-term potential.

A Valuation Too Good to Ignore

The compelling narrative around Micron's growth is further amplified by its current valuation. As mentioned, the expected earnings growth is astronomical, reflecting booming memory prices and insatiable end-market demand fueled by AI. Yet, investors have the opportunity to acquire Micron stock at an earnings multiple that is less than half the average of its technology sector peers. The remarkably low PEG ratio of 0.15 serves as a powerful indicator that the market has not yet fully appreciated Micron's future earning power.

Act Now: The Time to Consider Micron Is Here

Given its pivotal role in the AI ecosystem, its robust secular growth opportunities across multiple lucrative markets, and its undeniably attractive valuation metrics, Micron Technology presents a rare investment opportunity. The consistent and remarkable growth it has demonstrated appears sustainable for the foreseeable future. For investors seeking exposure to the transformative power of AI without paying exorbitant premiums, Micron stock is a compelling, perhaps even a "no-brainer," addition to a well-diversified portfolio.