Seems like semiconductors are the talk of the town these days. The rise in semiconductor stocks was fueled by AI-related demand for its chips (just look at Nvidia).
So, the AI gold rush is on. However, that’s not the full story. Saqib Iqbal, a financial analyst at Trading.Biz, breaks down a game-changing stock amidst the chip rush.
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Micron Technology Inc. (NASDAQ: MU) is an undervalued stock amidst the semiconductor surge.
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A $6.1 billion grant from the Biden administration boosts Micron’s innovation in chip development.
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Micron’s vertically integrated structure, coupled with undervaluation, positions it as a front-runner in the chip industry.
He says, “In recent years, share values in the semiconductor industry have risen dramatically. I think semiconductor stocks are generally volatile, but their growth potential is hard to ignore. One such stock is Micron Technology Inc. (NASDAQ: MU). It has solid fundamentals and a competitive edge and is also part of a larger project, indicating substantial upside potential.”
Last week, the Biden administration took a big strategic step by giving Micron Technology Inc. (NASDAQ: MU) a $6.1 billion grant. This funding enables Micron to develop innovative chips in New York and Idaho, possibly changing the semiconductor scene and improving its long-term prospects.
During the next two decades, Micron plans to invest $100 billion in New York alone. According to estimates, this investment will generate 9,000 direct jobs and 40,000 construction jobs.
What separates Micron is its vertically integrated structure. This allows it to handle much of its own production and manufacturing processes. The VI structure enables improved quality control, faster response times to market changes, and possible cost savings over rivals that rely on external suppliers and manufacturers.
If we look at the fundamentals, according to its discounted cash flow, the stock is undervalued by 7% with a potential upside of 23%. Revenue is expected to increase by 26% annually over the next three years. The sector is expected to rise by 26% annually, so the company is poised for an equivalent revenue outcome.
The chip industry is expected to grow at a 6.3% annual rate, reaching more than $737 billion by 2027, and Micron got a huge boost from the US Government. So naturally, MU will be the forerunner in the chip rush.
