Buy This Top AI Stock Down 20% After Nvidia Confirms AI Boom

Chipmaker and artificial intelligence stock Micron Technology, Inc. MU raised its guidance on August 11 as it benefits from the AI hyperscaler-driven data center boom and more. Micron stock stalled out at its 52-week highs and the top of a critical range after an initial pop.Micron’s improving earnings outlook earns MU a Zacks Rank #1 (Strong Buy), and it’s projected to post blockbuster earnings and revenue growth, rivaling Nvidia. Yet, investors can buy Micron 20% below its all-time highs and 30% below its average Zacks price target to start September.The tech stock also pays a dividend, and it’s part of an industry that’s in the top 11% of 245 Zacks industries. Its valuation levels help make Micron even more of a screaming buy right now.Image Source: Zacks Investment ResearchWall Street Still Loves Nvidia and AI StocksWall Street’s muted reaction to Nvidia’s earnings release, despite another record-breaking quarter from the artificial intelligence giant, is hardly cause for concern. Nvidia’s NVDA revenue climbed 56% and its adjusted earnings per share (EPS) surged 54%.Despite another massive AI-boosted quarter, Nvidia shares dipped on Thursday. Nvidia stock was simply due for a pullback.The semiconductor company would have had to wow investors to warrant a huge post-release jump to new highs since the AI stock is already up 90% from its early April lows.Thankfully, Nvidia’s report and outlook highlighted that the AI bull case remains firmly intact even though NVDA’s AI data-center revenue guidance narrowly missed forecasts. CEO Jensen Huang confirmed on Wednesday that the “AI race is on.”This backdrop means investors should start buying best-in-class AI stocks that are still trading at big discounts.AI and Tech Investors Should Buy Micron StockMicron is a leader in DRAM and NAND memory and storage chips, which are critical components in everything from smartphones to AI data centers. MU’s growth and innovations in a key segment of the semiconductor industry helped the stock climb over 1,700% in the past 15 years to crush the Zacks Tech sector’s 770%.Micron is a compelling long-term AI investment because it is a leader in high-bandwidth memory (HBM), which is critical for AI workloads. MU works directly with AI chip powerhouse Nvidia and NVDA’s closest rival, AMD. Micron’s CEO has said that AI will drive record memory chip demand.Image Source: Zacks Investment ResearchThe memory segment has been one of the more boom-and-bust-prone parts of the historically cyclical semiconductor industry.Micron’s revenue often fluctuated alongside consumer spending and production cycles across smartphones, PCs, laptops, vehicles, and more. The rapid expansion of AI data centers could see Micron break free of that dreaded cycle.Micron is a vertically integrated semiconductor company, meaning it designs, manufactures, and tests most of its chips in-house, unlike fabless companies such as Nvidia that outsource manufacturing to foundries like TSMC.The memory chip stock is expanding its manufacturing footprint in the U.S. as part of the larger reshoring boom.Micron’s AI-Boosted GrowthMicron posted record revenue in fiscal Q3 (reported on June 25), “driven by all-time-high DRAM revenue including nearly 50% sequential growth in HBM revenue.” Its data center revenue more than doubled, and it's expanding its manufacturing footprint to “satisfy growing AI-driven memory demand.”The chip company raised its Q4 guidance on August 11, citing “improved pricing, particularly in DRAM, and strong execution.”The company’s Q4 EPS estimate jumped over 10% since its update, with its FY26 consensus 7% higher. Micron’s improving earnings revisions earn the stock a Zacks Rank #1 (Strong Buy).Image Source: Zacks Investment ResearchMU is projected to grow its revenue by 47% in FY25 and 34% in FY26 to hit $49.4 billion, adding roughly $24 billion to its top line between fiscal 2024 and 2026. This growth outlook would see it soar beyond its previous all-time highs of roughly $30 billion, which it hit in FY18 and FY22.Micron’s adjusted earnings are expected to skyrocket by 519% in FY25 and 62% next year, from $1.30 in FY24 to $13.05 in FY26. It has also topped our EPS estimates in 18 out of the past 20 quarters, including a 10% average beat in the trailing four quarters.MU: Buy the AI Chip Stock for Value and UpsideMicron stock has jumped 167% in the past five years to outclimb Tech’s 100%, which is part of a 620% run over the past decade to top Tech’s 410%. The memory chip maker’s recent performance helps it top its sector over the last 20 years as well (921% vs. 825%).Image Source: Zacks Investment ResearchEven though it has outrun Tech during multiple key timeframes, MU trades 20% below its June 2024 peaks and 29% under its average Zacks price target at $122 per share.MU stock got rejected at its 52-week highs and its pre-June 2024 breakout peaks. Thankfully, the stock held its ground at its 50-day recently, and it might be poised to break out if investors start looking for deals in September.Image Source: Zacks Investment ResearchOn the valuation front, Micron trades at a 65% discount to Tech and directly in line with MU's 15-year median at 9.5X forward earnings. Factoring in its stellar earnings growth outlook via its PEG ratio, MU trades at a 90% discount to Tech.Zacks Names #1 Semiconductor StockThis under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Micron Technology, Inc. (MU): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks