Both chipmakers are poised to deliver exceptional growth thanks to strong demand for AI chips.
The semiconductor industry is expected to generate $611 billion in revenue this year, according to World Semiconductor Trade Statistics (WSTS), which would represent a 16% jump from last year’s levels. and the bright side is that growth is expected to continue in 2025. as well as an estimated 12.5% increase in revenue next year.
Artificial Intelligence (AI) has proven to be one of the main reasons for the healthy growth of the semiconductor industry. The proliferation of this technology has led to an increase in demand for several types of chips, ranging from application-specific integrated circuits (ASICs) to processors to memory.
Companies such as Nvidia (NVDA -3.26%) And Micron technology (UM -2.86%) have proven to be big beneficiaries of AI-powered semiconductor demand growth. Nvidia’s dominance in AI graphics processing units (GPUs) has led to stunning revenue and profit growth in recent quarters, with the company’s shares up 193% this year.
Micron, on the other hand, has also been stepping on the gas lately, even though its 27% stock price rise pales in comparison to Nvidia’s. In this article, we’ll take a closer look at the prospects and valuation of both companies to find out which of these two is the best AI stock to buy right now.
The case of Nvidia
Demand for data center GPUs has simply taken off over the past two years as the race to train and deploy AI models has intensified. Nvidia has proven to be the go-to supplier of data center GPUs, controlling approximately 98% of that market in 2023. The company sold approximately 3.76 million data center GPUs last year, an increase of 42% compared to the previous year.
The good news for Nvidia investors is that demand for AI GPUs remains robust. Global Market Insights estimates that the data center GPU market could reach an annual growth rate of 28% through 2032. Given Nvidia’s dominant position in this market, it’s easy to see why GPU shipments of the company are expected to increase in 2025.
For example, market research firm TrendForce predicts a 55% increase in Nvidia’s high-end GPU shipments next year, thanks to the arrival of the company’s new Blackwell chips. It is possible that Nvidia can generate data center revenue of $200 billion next year, which would be almost double the current fiscal year’s $98 billion in revenue (Nvidia reported $49 billion in data center revenue in the first six months of current exercise).
If this is indeed the case, Nvidia could easily beat Wall Street’s revenue expectations in the next fiscal year. The company is expected to end its current 2025 fiscal year with revenue of just under $126 billion, more than double the $60.9 billion generated in the previous fiscal year.
NVDA revenue estimates for the current fiscal year data by Y Charts
As the chart above tells us, analysts expect Nvidia’s revenue to grow another 42% in the next fiscal year, followed by a 17% increase in fiscal 2027. However, there’s a good chance Nvidia could beat those estimates thanks to the growth it’s seeing in nascent but rapidly growing niches such as data center networkingSovereign AI, and enterprise AI software.
These various catalysts suggest that Nvidia is on track to remain a top AI stock going forward as it looks to expand its reach into markets beyond data center GPUs.
The case of Micron technology
Demand for the memory chips used by Nvidia in their AI GPUs has exploded, leading to a massive turnaround in Micron Technology’s fortunes. The memory specialist ended fiscal 2024 (which ended Aug. 29) with a 61% jump in revenue to $25.1 billion and reported a profit of $1.30 per share, compared to a loss of $4.45 per share in the same quarter last year.
Micron management noted in its recent earnings release that “strong demand for AI has driven strong growth in our data center DRAM products and industry-leading high-bandwidth memory. » The good news is that the memory industry is also expected to maintain its tremendous momentum in 2025. According to TrendForce, the dynamic random access memory (DRAM) market could see a 51% increase in revenue next year, to reaching $136.5 billion, driven by the increasing consumption of high-bandwidth memory (HBM) deployed in AI chips.
Given that DRAM accounted for 70% of Micron’s total revenue last fiscal year, the strong outlook for this market bodes well for the chipmaker. Better yet, the NAND flash storage market (which produces the rest of Micron’s revenue) is expected to grow 29% in 2025 and generate $87 billion in revenue.
This sunny end-market outlook indicates why Micron’s guidance for the current quarter is extremely strong. The company expects revenue of $8.7 billion in the first quarter of fiscal 2025, as well as non-GAAP earnings (adjusted) of $1.74 per share. The final estimate shows an 84% increase from the same period last year, suggesting that Micron is on track to generate even stronger growth in the current fiscal year.
Consensus estimates compiled by Yahoo! Financials projects that Micron’s revenue will increase 52% this fiscal year to $38.2 billion, followed by a 20% increase in fiscal 2026 to $45.7 billion. Net income growth is also expected to remain robust compared to last fiscal year’s figure of $1.30 per share.
MU EPS Estimates for the Current Fiscal Year data by Y Charts
So, just like Nvidia, Micron looks like a solid AI Actions. But if you had to choose between one of these two names, which one should you buy?
The verdict
The discussion above tells us that Micron and Nvidia are on track to achieve impressive growth levels thanks to AI-driven demand for their chips. However, if you want to choose between these two semiconductor companies to take advantage of the AI boom, a closer look at their valuations will make your choice easier.
As the table below shows us, Micron is significantly cheaper than Nvidia.
PE NVDA ratio (forward) data by Y Charts
Of course, Nvidia seems deserving a premium valuation thanks to its impressive share of the AI chip market, but Micron’s pace of growth cannot be ignored either. So, investors looking for a blend of value and growth may want to consider buying shares of Micron Technology now because of its valuation and strong earnings growth prospects that could help this technology stock sustain his new momentum and to leap higher.