fixation with short-term stock performance over long-term investment potential often creates opportunities for the private investor to beat the so-called professionals. For the guy on Main Street, the point of investing is to build wealth over the long term, not to beat some arbitrary investment benchmark. Investment returns should be measured in years, not quarters. Last week, Wall Street created yet another opportunity in this vein.
Nvidia’s ultra-fast semiconductors have created an AI frenzy. The world’s largest technology companies, all American, are rapidly building data centers to process the information that forms the basis for AI. Nvidia’s chips are at the heart of the AI data centers, but AI also requires HBM semiconductors. No HBM chips, no AI. HBM chips sit next to Nvidia’s semiconductors on a silicon substrate. The two types of chips are wired together with interconnects.
However, Micron also produces memory chips for the personal computer and cellphone markets. This part of Micron’s product line is neither high growth nor high margin. It is cyclical. Today, there is an excess inventory of Micron’s commodity memory products. This temporary excess supply caused Micron to issue soft guidance for its next financial quarter. In response, Wall Street buried the stock, down 20%.
Looking out to Micron’s next fiscal year, which begins at the end of August 2025, the stock appears to be extraordinarily cheap, with earnings estimates above. The stock is selling at around 7 times forward estimates with a projected 5-year growth rate of 25%. If that sounds like a great bargain, it is a bargain.