Micron’s AI Chip Stocks Set to Skyrocket by 2025, Experts Predict

It’s undeniable that semiconductor stocks have emerged as some of the top performers during the AI boom. High-profile companies like Nvidia, Taiwan Semiconductor Manufacturing, and Broadcom have garnered much attention, but the broader chip sector has also delivered impressive returns over the last couple of years.

By the end of trading on December 20, the VanEck Semiconductor ETF had soared by 39% in 2024, significantly outpacing both the S&P 500 (SNPINDEX: ^GSPC) and the Nasdaq Composite (NASDAQINDEX: ^IXIC).

However, not every semiconductor company has enjoyed such success. Consider Micron Technology (NASDAQ: MU), whose stock only rose by 6% in 2024, potentially leading investors to dismiss it as a poor investment.

Savvy investors realize that the performance of a stock involves more than just its return. In the following discussion, I will delve into the factors affecting Micron’s stock performance this year and argue why 2025 might be a turnaround year for the company.

Micron’s Challenging Year

The chart below shows the fluctuations in Micron’s stock price over 2024. The ups and downs in the graph clearly indicate that Micron’s stock is quite volatile. Notably, the stock has faced a sharp decline of about 38% since June.

My analysis suggests that much of the volatility in Micron’s stock can be attributed to expectations. When companies like Nvidia, Taiwan Semiconductor, and Broadcom consistently show strong growth, investors often expect similar performance from other firms in the sector.

While it’s easy to draw such parallels, it’s crucial for investors to recognize that this approach is fundamentally flawed. Not every chip company produces the same products or serves the same markets, hence each faces unique challenges and opportunities.

Specifically, Micron specializes in memory and storage solutions for AI applications. Despite robust overall growth and increasing profitability, a forecasted significant miss for its fiscal second quarter of 2025 alarmed investors.

Yet, I believe this downturn in Micron’s stock is an overreaction. Below, I’ll explain why the recent drop might be seen as an unwarranted opportunity.

Potential for Recovery in 2025

Since AI became a significant trend two years ago, one particular product has stood out as essential in the tech sector: graphic processing units (GPUs).

Companies like Nvidia and AMD create these GPUs, which run complex algorithms at high speeds, powering a wide range of generative AI applications. Taiwan Semiconductor produces these GPUs for Nvidia and AMD, while Broadcom provides crucial networking infrastructure for data centers that utilize these GPUs.

Given this, it’s understandable why these specific companies have seen exceptional growth recently.

In my view, Micron hasn’t yet had its moment in the spotlight, but I believe it’s on the horizon. With AI infrastructure investments projected to reach trillions of dollars in the coming years, the demand for GPUs and associated data center services is unlikely to diminish.

On a more detailed note, this means that the demands for training and inferencing in AI will grow more sophisticated and critical as the competitive landscape intensifies. This situation should increase the need for advanced memory and storage solutions, a market where Micron stands to benefit significantly.

This isn’t mere speculation. For instance, in Micron’s fiscal first quarter of 2025 (ending November 28), its data-center revenue skyrocketed by 400% year-over-year, reaching a historic high. Now, data-center operations make up over half of Micron’s business. These figures emphasize the growing importance of Micron’s memory chips, and I expect this trend to continue into the next year and beyond.

Although short-term projections have been disappointing, the long-term outlook for Micron seems promising. Management expects the total addressable market for high bandwidth memory to grow to $100 billion by 2030, a significant leap from current levels. Given Micron’s recent annual revenue of approximately $29 billion, the potential for growth appears substantial.

Is now the time to invest in Micron?

Valuing Micron can be complex. Although the company is profitable, its recent shift to profitability makes traditional metrics like the price-to-earnings (P/E) ratio less relevant.

Rather, I prefer using the PEG ratio, which considers expected earnings growth over several years. Currently, Micron’s PEG ratio stands at just 0.23, suggesting potential undervaluation.

In my view, the low PEG ratio indicates that the market might be underestimating the growing need for memory and storage solutions as AI demands evolve. Over time, I believe the importance of Micron’s offerings will become increasingly apparent. Purchasing Micron shares now could prove to be an attractive opportunity for long-term investors.

Adam Spatacco is invested in Nvidia. The Motley Fool has stakes in and endorses Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

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