Investing in AI Server Stocks: Micron and Marvell Technologies
Artificial Intelligence Server Market Surge
The demand for artificial intelligence (AI) servers has skyrocketed in recent years. This growth can be largely attributed to the massive investments made by cloud service providers. They are building the necessary infrastructure to effectively train AI models and deploy them across various applications. This surge has led to an anticipated revenue of around $187 billion for the global AI server market this year, marking a remarkable 69% increase compared to the previous year.
In light of this rapid expansion, a multitude of companies are positioned to benefit significantly. Notably, leading chip manufacturers are attracting attention, with firms like Nvidia, Broadcom, and Dell Technologies taking advantage of this burgeoning opportunity. However, in this article, we will closely examine two companies that provide essential components in AI servers—Micron Technology (NASDAQ: MU) and Marvell Technology (NASDAQ: MRVL).
Demand for Micron Technology's High-Bandwidth Memory Chips
Micron specializes in high-bandwidth memory (HBM), vital for enhancing the performance of AI server chips, particularly graphics processing units (GPUs). The unique properties of HBM allow for quicker data transfers, which leads to faster processing speeds and reduced power consumption. Demand for Micron's HBM is so high that the company has announced that it has fully sold out its production capacity for the current year and the next.
Moreover, Micron's management has indicated that the company will diversify its revenue streams related to HBM significantly by 2026, thanks to their newly launched HBM3E chip. This innovative chip is already being dispatched for customer evaluations, and Micron anticipates it will consume 20% less power while providing a 50% increase in capacity compared to competing products.
The ramp-up for production of HBM3E is set to commence in early 2025, which should further bolster Micron's market share in the HBM segment. In a recent report from a Singapore-based news outlet, it was mentioned that Micron aims to capture 20% to 25% of the HBM market by next year, potentially increasing its projected revenue from $4 billion to $25 billion in this sector by 2025.
Given these favorable market conditions, Micron's revenue is forecast to leap by an impressive 52%, reaching $38 billion in this fiscal year. This projection includes an estimated jump in earnings per share from $1.30 to nearly $8.94.
Marvell Technology's Rise Through Custom AI Chips
Marvell Technology focuses on manufacturing application-specific integrated circuits (ASICs). These custom-designed chips are becoming increasingly vital in the AI server market, as major cloud providers like Meta Platforms, Google, and Amazon shift towards developing in-house processors to cut costs. Thus, ASICs are predicted to constitute 26% of the AI server chip market by 2024.
The growth prospects for ASICs in AI applications hint at a revenue opportunity amounting to approximately $150 billion, which Marvell is strategically tapped into. Although Marvell reported a minor revenue decline of 5% in its second fiscal quarter, its performance in the data center segment significantly improved, with revenue bouncing up 92% year-over-year.
CEO Matt Murphy recently addressed improvements in Marvell's custom silicon programs, indicating that the production of their first two AI chips has entered volume manufacturing. He forecasted that the data center segment's growth could accelerate to high teen percentages sequentially in the upcoming quarter, revealing promising financial potential for Marvell.
Marvell projects that its fiscal third-quarter revenue will reach around $1.45 billion, a slight increase compared to the same period last year. This aligns with analysts’ expectations for sustained growth in the coming years, as Marvell capitalizes on the increasing demand within the AI server sector.
Is Now the Right Time to Invest in Micron Technology?
If you're considering purchasing shares of Micron Technology, there are several factors to keep in mind. Although some expert analyses have excluded Micron from a select list of top investment opportunities, it's crucial to weigh its future growth prospects against other potential stocks.
Investors might find compelling reasons to consider Micron, especially in light of its sound strategy to dominate the high-bandwidth memory market vigorously. Additionally, Micron's forward earnings multiple stands at an attractive 11, greatly underlining its potential value relative to the anticipated growth.
With robust projections for both Micron Technology and Marvell Technology, investors may be drawn towards these tech stocks that are poised to thrive amidst the AI server boom. Whether you choose to invest now or take a more cautious approach, staying informed about the evolving landscape of AI technology is vital.
Frequently Asked Questions
What are the main components of AI servers?
AI servers typically include high-bandwidth memory (HBM), graphics processing units (GPUs), and application-specific integrated circuits (ASICs), which enhance processing speed and efficiency.
How much is the AI server market expected to grow?
The global AI server market is projected to reach approximately $187 billion in revenue, reflecting a significant increase from previous years.
Why is Micron Technology significant for AI servers?
Micron produces high-bandwidth memory chips essential for improving the speed and power efficiency of AI server components, which are experiencing soaring demand.
What is Marvell Technology's role in AI servers?
Marvell Technology manufactures custom chips (ASICs) tailored for specific tasks within AI servers, making it an integral player as cloud services shift to in-house processing solutions.
Should I invest in Micron or Marvell Technology?
Both Micron and Marvell Technology present compelling investment opportunities as they are well-positioned to capitalize on the growing AI server market, making them worth considering for a diversified tech portfolio.
About Investors Hangout
Investors Hangout is a leading online stock forum for financial discussion and learning, offering a wide range of free tools and resources. It draws in traders of all levels, who exchange market knowledge, investigate trading tactics, and keep an eye on industry developments in real time. Featuring financial articles, stock message boards, quotes, charts, company profiles, and live news updates. Through cooperative learning and a wealth of informational resources, it helps users from novices creating their first portfolios to experts honing their techniques. Join Investors Hangout today: https://investorshangout.com/
Disclaimer: The content of this article is solely for general informational purposes only; it does not represent legal, financial, or investment advice. Investors Hangout does not offer financial advice; the author is not a licensed financial advisor. Consult a qualified advisor before making any financial or investment decisions based on this article. The author's interpretation of publicly available data shapes the opinions presented here; as a result, they should not be taken as advice to purchase, sell, or hold any securities mentioned or any other investments. The author does not guarantee the accuracy, completeness, or timeliness of any material, providing it "as is." Information and market conditions may change; past performance is not indicative of future outcomes. If any of the material offered here is inaccurate, please contact us for corrections.