Micron or AMD: Top Analyst Picks the Superior AI Chip Stock to Buy

The rapid expansion of AI is changing the modern digital world in ways that are only beginning to grow clear. Everything from e-commerce to data centers to online search to digital marketing to semiconductor chips – it’s all turning upside down, thanks to AI.

These changes are bringing huge opportunities for investors, too. As AI-related companies move into new spaces, and expand their own business opportunities and customer bases, stock investors will find ways to cash in.

Some quick numbers from the AI chip segment will suffice as a proxy for the size of the overall opportunity in AI. According to SNS Insider, the AI chip market totaled $61.45 billion last year, and is expected to reach $621.15 billion by 2032. That’s a CAGR of more than 29%, from this year through 2032 – and an expansion of that magnitude is certain to open plenty of doors.

Covering the AI chip stocks for Wolfe Research, top-rated analyst Chris Caso takes a deep dive into Micron (NASDAQ:MU) and Advanced Micro Devices (NASDAQ:AMD), two well-known names in the semiconductor space, to pick the better chip stock to buy right now, for the best exposure to AI.

Caso, who is rated by TipRanks among the top 1% of Wall Street’s analysts, comes down with a clear choice of which chip stock to buy. Let’s take a closer look.

Micron Technology

First up is Micron Technology, the Idaho-based semiconductor chip firm that has built its reputation, and its success, on its ability to design and distribute high-end memory chips. Micron has been in the chip business since 1978, and today its $121 billion market cap makes the company the 11th largest semiconductor company on the global scene.

Micron is especially well-known for the memory chips that populate its product line, including flash-based SSDs, DRAM memory solutions, and 9th-gen NAND chips. The company boasts that it can optimize storage at any scale, and its memory technologies are in high demand by developers working on generative AI and natural language processing.

Micron’s core business is, and always has been, memory storage, and the company is one of the industry’s important suppliers of storage chips for the PC industry, including SSD drives. As noted, NAND and DRAM are also prominent in Micron’s product lines. The NAND chips, particularly, deserve notice here, as the company reports that these products are an important driver of demand from the data center sector – which is directly connected to the AI boom. Micron’s data center business in the last reported fiscal quarter, fueled by AI-capable chips, was led by NAND and SSD sales and topped $1 billion for the first time.

Last month, Micron announced a new SSD product, an industry-first 60TB unit. The ION 6550 is designed to deliver the highest possible energy efficiency, and to offer as much as 67% more density per rack – important features for exascale data center servers.

Micron is set to release its fiscal first-quarter earnings this Wednesday (December 18). In the meantime, it’s useful to review the FQ4 results for a snapshot of the company’s position earlier this year. Revenue for FQ4 totaled $7.75 billion, marking a 93% year-over-year increase and exceeding forecasts by $100 million. On the bottom line, Micron posted a quarterly non-GAAP EPS of $1.18, beating estimates by 7 cents per share. For the full fiscal year 2024, the company reported total revenue of $25.11 billion and a full-year non-GAAP EPS of $1.30 per share.

Looking ahead to fiscal 1Q25, analysts are expecting to see $8.7 billion in revenues and quarterly earnings of $1.77.

Laying out the view from Wolfe, top analyst Caso sees Micron in a strong position, noting: “MU is our Wolfe Alpha List pick. We think MU stands to outperform peers next year due to 1) its node leadership, 2) relative under-exposure to China vs peers, and 3) share gains in HBM in CY25. NVDA remains one of our favorite names in semis as well as we expect its strong competitive position in AI will drive strong demand/pricing leverage for its datacenter GPUs over the next several years.”

To this end, Caso rates MU shares a Buy, while his $200 price target points toward a one-year upside potential of 82%. (To watch Caso’s track record, click here)

Overall, Micron has earned a Strong Buy rating from the analyst consensus, based on 24 Wall Street reviews that include 23 Buys to just one Hold. The shares are priced at $108.62, and their $153.05 average price target implies an upside of 41% for the coming year. (See MU stock forecast)

Advanced Micro Devices

Up next, we turn to AMD – a heavyweight contender in the semiconductor arena. Ranked as the world’s 6th largest chipmaker, this $203 billion industry giant raked in $24 billion in revenue over the past year, ending 3Q24. The company has a sound niche in the chip industry and is actively angling to cut into the market share of industry-leading Nvidia. AMD has a solid product line-up to back up this challenge, featuring a combination of high-end PC processor chips and AI-capable accelerators.

AMD’s recent new product offerings include several chipsets for the AI and related markets, including the new Instinct MI300A APU, an exascale accelerator purpose-built to power the fastest-ever supercomputer; the Versal Premium Series Gen 2, which is optimized for data movement efficiency and is built to bring increased memory storage in data-intensive markets; and the Ryzen 7 9800X3D desktop processor, marketed for high-end gaming uses. The bottom line for the company’s new products is their capacity for handling large data flows quickly and efficiently. Altogether, AMD’s product lines have put the company into a leading position in adaptive and high-performance computing. The company gets support for its AI business from its partnerships with major AI companies like Microsoft, Meta, and Oracle.

AMD reported its results for 3Q24 at the end of October. The release showed a top-line revenue total of $6.82 billion, up 18% from the prior-year quarter and $110 million better than had been anticipated, along with a non-GAAP bottom-line EPS of 92 cents, which was in line with the forecast. The company provided Q4 guidance of $7.5 billion.

In his coverage of AMD, Wolfe’s Caso sees some reasons for concern, primarily due to the possibility that the company may fall short of expectations in the upcoming 4Q24 report.

“We think the setup for the stock into Jan earnings is difficult. While forecasts can change as CY25 proceeds, we don’t think there’s enough visibility to guide AI in line with $10bn street expectations, and guidance of $7bn will drive an expectation that they will raise that guidance later – which they may not be able to do. Our best guess is that AMD won’t be in a position to guide AI for CY25 – which will in itself drive concerns. We also expect some downside to street estimates in 1Q due to slow 1Q PC seasonality off a strong 4Q24 (we model 1Q rev of $7.04bn vs. Street $7.09bn). We also think a XLNX recovery (like others in analog) is more likely in 2H25 than 1H. Our rating and estimates remain under review as we assess the impact,” Caso opined.

Given these uncertainties, Caso has opted not to assign a rating to AMD at this time.

All in all, there are 30 recent analyst reviews on file for AMD, and their split of 22 Buys to 8 Holds gives a Moderate Buy consensus. The stock is currently trading at $125.02, while the average target price of $182.57 points to a potential 44% upside over the next 12 months. (See AMD stock forecast)

With all the facts laid out, it’s clear that Chris Caso sees Micron as the superior semiconductor chip stock to buy as 2024 comes to a close.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.