Do you believe in the long-term potential of companies like Nvidia (NASDAQ:NVDA) continuing to push the boundaries of artificial intelligence? Good. Then you also believe in semiconductor memory stocks. You just don’t know it yet.
Given the stratospheric rise of generative AI, people sing the praises of Nvidia and its peers. Specifically, their graphics processing units (GPUs) help undergird the intense processing demands of AI protocols. And since Bloomberg Intelligence believes the sector could expand at a compound annual growth rate (CAGR) of 42% to hit a $1.3 trillion valuation by 2032, it’s no wonder why AI-related enterprises dominate.
But betting exclusively on GPUs is like asking a carpenter to renovate your home without tools. The talent and capabilities may be there but without the necessary equipment, nothing will get done. It’s same thing with memory, which is why semiconductor memory stocks are so vital.
True, the memory market – particularly the NAND ecosystem – suffered due to various headwinds related to global supply chain, inflation and geopolitical issues. However, processing demand and memory go hand in hand. With that, below are compelling semiconductor memory stocks to consider.
Qualcomm (QCOM)
Although not a pure-play idea among semiconductor memory stocks, Qualcomm (NASDAQ:QCOM) represents a vital cog in the mobile communications space. Specifically, the company offers acumen in the development of system-on-chips (SoC) solutions, including processors and communication technologies used in mobile devices.
With SoCs incorporating multiple functional components – including memory – they play a huge role in modern communication systems.
Another factor that should help QCOM over the long run is that it’s underappreciated. For example, in the past 52 weeks, QCOM only gained just under 4%.
Still, the market performance appears to heavily discount the company’s consistent profitability as well as its bottom-line strengths, such as excellent margins across the board. Enticingly, QCOM trades at only 15.37X forward earnings, below the sector median of 22.08X.
Plus, the SoC market size should expand at a CAGR of 8% to reach $253.8 billion by 2029. Therefore, its moderate buy consensus view among analysts – with a $157.83 price target – is credible. One could make the argument that QCOM’s high-side target of $180 (implying almost 28% upside) is more aligned with reality.
Micron (MU)
One of the top players among semiconductor memory stocks, Micron (NASDAQ:MU) specializes in multiple industry subsegments.
In addition to the core computer memory segment, it also offers data storage solutions, such as dynamic random-access memory (DRAM), flash memory and USB flash drives. Its importance to the broader ecosystem shows through its equity performance. In the past 52 weeks, MU shot up almost 36%.
However, analysts – who rate shares a consensus strong buy – believe more upside is available. Overall, the average price target lands at $96.57, which includes the less-than-encouraging hold ratings along with a lone “sell” by Morgan Stanley. Notably, the high-side target stands at $115, which implies growth of over 34%. That view – from KeyBanc’s John Vinh – arrived on Jan. 31 and probably reflects the reality of the situation.
As the company’s website states, “Micron’s industry-leading memory and storage solutions enable the latest generation of faster, more intelligent global infrastructures that make AI, machine learning, and generative AI possible.” And it’s not a self-serving statement. AI simply can’t function without memory chips.
Western Digital (WDC)
Last October, Western Digital (NASDAQ:WDC) – another top player among semiconductor memory stocks – announced that it would split into two separate entities. One will focus on traditional hard disk drives and the other will target flash memory solutions.
Based on similar developments, this news should mean that investors before the split should receive shares in both companies. That could be an enticing deal.
According to Straits Research, the global NAND flash memory market reached a valuation of $67 billion in 2021. By 2030, the segment could be worth $117 billion, representing a CAGR of 6.39%. And despite prior challenges, the hard disk drive (HDD) market is no slouch either. By 2033, it could still clock in at nearly $127 billion, representing a CAGR of 12%.
Now, that might be an optimistic target but the point is that Western Digital is a huge player in the space. Therefore, the split should help unlock value. Currently, analysts rate shares a consensus moderate buy with a $66.76 average price target, implying over 16% upside. The maximum price target lands at $75, projecting almost 31% growth.
— Josh Enomoto
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Source: Investor Place