1 Cheap Artificial Intelligence (AI) Stock to Buy Right Now Before It Starts Soaring Like Nvidia

Nvidia (NASDAQ: NVDA) has become a leading company in the artificial intelligence (AI) industry. Its graphics processing units and processors are essential in building powerful servers that can handle AI workloads. The demand for Nvidia’s chips is so high that customers often have to wait at least six months to get them. In the second quarter of fiscal 2024, Nvidia’s revenue doubled to $13.5 billion, with adjusted earnings increasing by 429% to $2.70 per share.

Nvidia’s growth is expected to accelerate even further in the current quarter, with a projected revenue of $16 billion, a 171% increase compared to the previous year. The company’s powerful chips play a crucial role in training and applying AI models.

However, manufacturing these high-performance chips wouldn’t have been possible without powerful memory. Micron Technology (NASDAQ: MU) is one of the key players in the memory market and has a solid position to take advantage of the increasing demand for powerful memory chips in the AI industry, where companies like Nvidia, Intel, and AMD are racing to develop larger memory configurations.

AI-driven demand could boost Micron’s growth

Micron Technology’s stock has risen by 40% in 2023, driven mainly by the overall surge in semiconductor stocks rather than the chipmaker’s financial performance. Micron has experienced declines in revenue and earnings in recent quarters due to weak memory demand caused by slow sales of personal computers (PCs) and smartphones.

The memory industry currently faces oversupply issues, resulting in significant price drops of memory chips. The prices of dynamic random access memory (DRAM) and NAND flash memory have fallen by more than 50%. As a result, Micron’s top and bottom lines have decreased over the past year.

However, the increasing demand for AI chips with high bandwidth memory (HBM) could revive the memory industry. Consultancy firm Gartner estimates that HBM demand will grow eightfold by 2027, driven by AI applications. This could lead to a recovery in the DRAM market starting from the end of 2023, and significant growth in the future. Gartner also projects that DRAM revenue will increase from $43.8 billion this year to $86.9 billion in 2024, with prices potentially rising by almost 18% in Q4.

The stock looks like a steal right now

Assuming Micron achieves $28 billion in revenue by fiscal 2025, and maintains its price-to-sales ratio of 4.2, its market capitalization could reach $117 billion, representing a 52% increase from current levels.

Furthermore, companies benefiting from the adoption of AI tend to trade at higher multiples. Nvidia, for example, has a sales multiple of 36. If the market rewards Micron with a higher valuation based on its potential acceleration in growth, the stock could deliver even better gains.

For investors looking to buy an AI stock at an attractive valuation, Micron Technology is worth considering.

*Stock Advisor returns as of September 11, 2023. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Gartner and Intel. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.