This Artificial Intelligence (AI) Stock Trades at Just 22 Times Earnings — and It’s Growing Fast

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In the last two to three years, artificial intelligence (AI) has significantly fueled the expansion of numerous businesses. This surge is largely due to the substantial investments made in both AI hardware and software, which are used to educate AI systems and deploy them for use, thereby harnessing the advantages that AI technology offers.

It’s no wonder that some of the leading AI companies are currently valued at high prices. Companies like Nvidia, Broadcom, Palantir Technologies, and SoundHound AI fall into this category. If you’re considering investing in a premier AI stock, be prepared to pay substantial premiums for these stocks at present.

Despite the fact that many companies are currently undervalued, one company, Micron Technology (MU -2.75%), stands out for its not only attractive valuation but also impressive growth rate driven by AI. Here’s a look at why investors might want to consider purchasing this stock right now.

Data centers, smartphones, and computers are fueling this chipmaker’s terrific growth

Micron Technology is a company that produces and distributes memory and data storage components, which find use in artificial intelligence (AI) graphics cards, regular computers (personal computers or PCs), and smartphones. This positions the company as an excellent investment opportunity in the ongoing expansion of the AI hardware industry.

Instead, modern AI processors in data centers are often outfitted with High-Bandwidth Memory (HBM) due to their ability to deliver significantly greater bandwidth and reduced latency. This makes HBM chips exceptionally fast at moving large volumes of data compared to traditional memory chips, making them well-suited for handling AI tasks efficiently.

Micron Corporation emphasizes its strong connections with virtually all significant clients of High Bandwidth Memory (HBM). Independent assessments align with this claim, revealing that Micron supplies HBM to the leading four AI chip manufacturers who produce both GPUs and custom AI processors. The company aims to capture approximately 25% of the HBM market share by year-end, potentially boosting Micron’s income and profits substantially.

It’s predicted that the High-Bandwidth Memory (HBM) market will nearly double its revenue by 2025, reaching approximately $35 billion in sales. This forecast increases even further to $100 billion by 2030. If Micron manages to maintain a 25% share of this sector, HBM could potentially contribute around $25 billion to their total income over the next five years (based on the projected revenue of $100 billion).

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It’s likely that Micron’s expansion will receive a significant lift, as the company has reported approximately $34 billion in revenue over the past year. Moreover, further growth may be anticipated from sectors like PC and smartphone industries, where the need for memory is on the rise due to an uptick in average dynamic random-access memory (DRAM) content, primarily driven by AI advancements.

For example, it’s possible that the market for mobile DRAM could surge up to six times its current size over the next ten years, potentially earning over $636 billion. This growth is largely due to the rise in AI and machine learning (ML) applications, which will increase the need for compute memory in smartphones. It’s worth noting that this isn’t the only factor driving growth for Micron; there are other catalysts as well.

The business claims it ranked second in the market for data center solid-state drives (SSDs) during the initial quarter. This potentially bodes well for Micron in the long run, as experts predict that the data center SSD market will expand more than seven times its current size by 2033.

All in all, it’s clear that Micron offers robust, long-term growth prospects, making it a strong contender for a top growth stock. Given its current valuation, investing in the stock at this moment could prove to be an excellent decision.

The biggest reason to buy Micron stock hand over fist

It is predicted that Micron’s earnings will increase significantly, around six times, during the current financial year which concludes next month. This substantial growth can be linked to soaring memory prices due to massive demand for AI-driven applications across various sectors. Additionally, analysts anticipate a 54% increase in Micron’s earnings in the following fiscal year as well.

A favorable aspect is that investors can acquire Micron stock for only 22 times its earnings, which is quite a bargain compared to the U.S. technology sector’s average multiple of 51. Additionally, it’s crucial to consider that Micron might be underpriced when considering its potential for long-term earnings growth.

As an eager investor, I’ve come across a captivating find! The PEG ratio for this stock is a tantalizing 0.15, a figure derived from its projected five-year earnings growth rate, as per Yahoo! Finance. The PEG ratio is a forward-looking metric that gauges a stock’s value by dividing its earnings multiple by the anticipated annual growth rate over the next five years. A PEG ratio below 1 implies this stock could be an undervalued gem, considering its potential future growth.

Based on Micron’s Price/Earnings to Growth (PEG) ratio, it appears that the stock is significantly underpriced at the moment. Given its recent impressive growth trajectory, this AI-focused company could be an excellent investment opportunity, as its strong growth trend seems likely to persist for a considerable period.

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2025-07-18 00:40