1 Super Semiconductor Stock To Buy Hand Over Fist In 2025, According To Wall Street

The semiconductor industry is the beating heart of the artificial intelligence (AI) revolution. Most investors are focused on Nvidia (NASDAQ: NVDA) -- and rightly so, because it makes the best data center chips for developing AI -- but it isn't the only semiconductor company cashing in on this technology boom.

Micron Technology (NASDAQ: MU) is a leading supplier of memory and storage chips, which have become important components of the AI hardware story. As a result, the company's data center revenue is soaring at the moment, but it also faces significant AI opportunities in the smartphone and personal computing (PC) segments.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

Micron reported a strong set of financial results for its fiscal 2025 first quarter (ended Nov. 28) on Wednesday, Dec. 18, but its stock plunged 12% in after-hours trading. However, the Nasdaq-100 technology index sank 3.6% on the day, its second-worst drop in 2024 so far, so it was a bad day for the stock market overall.

Therefore, this might be a golden opportunity for investors as we head into 2025. The Wall Street Journal tracks 43 analysts who cover Micron stock, and the overwhelming majority have assigned it the highest-possible buy rating. Here's why the Street is so bullish.

AI workloads are driving demand for higher memory capacities

Memory chips complement the graphics processors (GPUs) supplied by Nvidia. They store information in a ready state so it can be called upon instantly, which is essential in data-intensive AI workloads. Since many AI models now rely on trillions of data points, they require significant memory capacity.

Micron's HBM3E (high-bandwidth memory) solutions are the best in the industry, providing 50% higher capacity than competing hardware while consuming 30% less energy. That's why Nvidia chose Micron's HBM3E to power its new Blackwell GB200 data center GPU, which is the company's most powerful AI chip to date.

Micron is completely sold out of its data center memory chips until 2026, but it isn't resting on that success. It's already working on a new HBM4E solution, which will offer a 50% leap in performance compared to its HBM3E hardware. The market for data center HBM is worth around $16 billion annually right now, but Micron predicts that number will grow to $100 billion by 2030. Maintaining a technological edge will be key to capturing as much of that value as possible.

But Micron's AI opportunity transcends the data center, because PCs and smartphones are capable of processing some AI workloads on-device without requiring external computing power. The company says PCs fitted with AI processors require DRAM memory capacity of between 16 and 24 gigabytes, compared to an average DRAM content of 12 gigabytes in non-AI PCs last year. Higher capacity translates into more expensive DRAM chips, which means more revenue for Micron.

On the smartphone front, more than 60% of the new devices using Micron's hardware required at least 8 gigabytes of memory capacity during the recent quarter, which is significantly higher than last year. The company also recently told investors that a number of smartphone manufacturers using the Android mobile operating system have announced AI devices with 12 gigabytes and 16 gigabytes of memory, so capacity is climbing fast.

Micron's revenue is growing rapidly, led by the data center

Micron generated a record $8.7 billion in total revenue during its fiscal 2025 first quarter, which was a whopping 84% increase from the year-ago period. However, the real story is beneath the surface of the headline number.

Micron said its data center revenue, specifically, soared by 400% year over year to $4.4 billion. It accounted for over 50% of the company's total revenue for the first time, and its momentum is likely to carry through into the next few quarters as HBM shipments are running ahead of schedule.

Micron's mobile segment revenue came in at $1.5 billion, which was a modest increase of 15% compared to the year-ago period (although it was down sequentially compared to the quarter three months earlier). AI should continue driving demand for higher DRAM capacity, as I mentioned, so calendar 2025 is likely to be a strong year for the mobile segment.

The company also experienced a surge in its profits thanks to its rapid revenue growth combined with careful expense management. Its non-GAAP (generally accepted accounting principles) earnings per share (EPS) came in at $1.79 during the quarter, which was a big positive swing from the $0.95 per-share loss it generated in the same quarter last year.

Micron's profitability tends to be lumpy because of the cyclical nature of the semiconductor industry. For example, it only generated $1.30 in non-GAAP EPS during the whole of fiscal 2024, due to high inventory levels and soft prices during the first half of that year. Those issues were less prevalent during the first quarter of fiscal 2025, and the company also benefited from the incredible AI tailwind.

Wall Street is bullish on Micron stock

Since AI products like HBM3E are already sold out next year, they add some predictability to Micron's financial results. Wall Street's consensus estimate (provided by Yahoo!) suggests the company will deliver $8.90 in EPS for the whole of fiscal 2025, which places its stock at a forward price-to-earnings (P/E) ratio of just 10.2.

That's a 65% discount to Nvidia's forward P/E ratio of 29.6. Considering the incredible growth in Micron's data center segment right now, I would argue the current discount is far too steep. After all, Micron's HBM3E sales will be closely tied to Nvidia's GB200 sales going forward -- so if you think Nvidia will sell a truckload of AI chips, it's difficult to be bearish on Micron's prospects.

That might be why Wall Street remains bullish on Micron stock. Of the 43 analysts tracked by The Wall Street Journal, 29 have assigned it the highest possible buy rating. A further 10 are in the overweight (bullish) camp, and three recommend holding. Just one analyst in the entire group recommends selling.

The analysts have an average price target of $146.82 for Micron stock, implying a potential upside of 61% over the next 12 to 18 months from where it trades as of this writing. The Street-high target of $250 points to a potential upside of 174%.

Therefore, investors seeking some value in the booming AI semiconductor space should consider adding Micron stock to their portfolio for the new year.

Should you invest $1,000 in Micron Technology right now?

Before you buy stock in Micron Technology, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Micron Technology wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $800,876!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of December 16, 2024

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.