Investing in AI: Why Advanced Micro Devices and Micron Technology Deserve Your Attention
The holiday season is the perfect opportunity for investors to revisit their portfolios and look ahead to the new year. As we approach 2025, artificial intelligence (AI) continues to shape the stock market landscape. Major tech companies are set to invest record sums in AI research and development over the next year, presenting exciting prospects for certain stocks.
Spotlight on Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ: AMD) has established itself in many popular electronics, including Sony‘s PlayStation 5 and Microsoft‘s Xbox. Its new AI graphic processing units (GPUs) are now attracting big names like Meta Platforms and Oracle.
The MI300X AI GPU positions AMD to compete directly with Nvidia’s leading product, the H100. AMD claims that customers using this GPU are realizing better performance at lower costs. In addition to the MI300X, AMD recently introduced the MI325X GPU, while a highly anticipated MI350 series is set to launch in the latter part of 2025.
The MI350 is particularly significant, intended to rival Nvidia’s newest GPUs, which are reportedly up to 30 times more powerful than older versions. AMD projects that the MI350 will deliver around 35 times the performance of the MI300, hinting at strong potential.
In its third quarter of fiscal 2024, AMD’s data center revenue skyrocketed 122% year-over-year, reaching $3.5 billion. The company anticipates generating approximately $5 billion in GPU revenue for the entire fiscal year, significantly exceeding earlier forecasts.
Though AMD is experiencing challenges in its gaming segment, it expects recovery with the release of new chips in 2025. As it stands, the stock’s valuation is compelling, with a forward price-to-earnings (P/E) ratio of 24.4, notably lower than Nvidia’s.
The Promise of Micron Technology
Micron Technology (NASDAQ: MU) specializes in memory and storage chips crucial for AI applications. These chips are essential for allowing systems to quickly access data, which is important in handling intensive AI tasks.
The company’s latest product, HBM3E (high-bandwidth memory), offers 50% more capacity and consumes 30% less energy than its competitors, making it a preferred choice for Nvidia’s new GPUs. Micron is currently operating at full capacity and is already working on the next iteration, HBM4E, set to enhance performance even further.
In the first quarter of fiscal 2025, Micron’s data center revenue hit $4.4 billion, marking a staggering 400% increase from the previous year. This growth has allowed the data center segment to yield over half of the company’s total revenue of $8.7 billion.
Micron estimates that the $16 billion data center market for high-bandwidth memory could expand to $100 billion by 2030, presenting significant growth opportunities. With demand surging in both PCs and smartphones, Micron’s revenue prospects are brighter than ever.
Wall Street projects earnings per share for Micron could reach $8.90 in fiscal year 2025, which puts the stock at an attractive forward P/E ratio of 10.1, much lower than Nvidia and AMD. With demand linked to Nvidia’s successful GPU sales, Micron’s current valuation seems undervalued.
A Second Chance for Smart Investment
Have you ever felt like you missed a major investment opportunity? You’re not alone. Major investment recommendations have historically led to incredible returns. For example, a $1,000 investment in Nvidia back in 2009 would be worth over $363,000 today.
With a unique offering from our analysts called “Double Down” stocks, there may be yet another opportunity available. Time is of the essence.
- Nvidia: A $1,000 investment when we doubled down in 2009 would now be worth a staggering $363,593.
- Apple: A $1,000 investment in 2008 would have grown to $48,899.
- Netflix: Similarly, an investment in 2004 would have blossomed to $502,684.
This is an opportune moment to consider AMD and Micron as potential winners as we head into 2025.
Randi Zuckerberg serves on The Motley Fool’s board of directors. Anthony Di Pizio has no position in any stocks mentioned. The Motley Fool recommends Advanced Micro Devices, Meta Platforms, Microsoft, Nvidia, Oracle, and Tesla. The Motley Fool has a disclosure policy.
The views shared are the author’s own and do not necessarily reflect those of Nasdaq, Inc.
