Big tech and artificial intelligence (AI) stocks have faced a bit of a headwind this year, as investors question how long the AI capital spending spree can continue. The Iran war hasn’t helped either.
But amid the selloff, Wall Street analysts are seeing buying opportunities that they believe will pay off over the next 12 to 18 months. Recently, KeyBanc analyst John Vinh released several research reports highlighting buying opportunities in two stocks in the AI ecosystem: intel(NASDAQ: INTC) And micron(NASDAQ: MU).
Will AI create the world’s first trillionaire? Our team recently released a report on a little-known company dubbed an “essential monopoly” that provides critical technology needed by both Nvidia and Intel. continue “
Vinh maintained an overweight rating on Intel and raised his price target to $70 from $65 per share. As of April 7, the stock was trading at around $50 per share, indicating a 35% increase.
Vinh also reiterated an Overweight rating on Micron and his $600 price target. At the time of this writing, Micron stock was trading at around $370, indicating a potential upside of about 62%.
Image Source: Getty Images.
Intel is a hardware company that has been around for a long time, going public in 1971. Historically, the company was one of the largest manufacturers of chips for personal computers, but as times have changed, the company has had to reposition itself in the new era of AI.
The company has begun to make a comeback in recent years by realigning its hardware strategy to fuel the AI revolution. While graphics processing units (GPUs) are at the center of the AI story, due to their parallel processing capabilities, AI still needs Central Processing Unit (CPU)Which are chips that can process information sequentially and fueled the traditional computer boom.
CPUs play a role in transmitting data between different GPUs. But now they are in greater focus, as agentic AI and smaller language models that run more efficiently on CPUs are becoming more widely used. Furthermore, AI agents are putting more pressure on the CPU, and more are required. This is where Vinh sees Intel gaining an advantage.
“Overall demand for servers has continued to be strong as AI-agent-driven workloads increase. However, supply remains heavily constrained due to limited server CPUs,” Vinh wrote in a research note. He said he expects Intel to raise its CPU prices by 10% to 15% in the second quarter of this year, after making a similar increase in the first quarter.
Intel has seen a nice rebound in its stock in the last year, although it’s still down about 26% over the past five years. With CPU demand rising, Intel is well positioned to capitalize, so I think investors can buy the stock. Interestingly, the company is also planning to make gpu For AI data centers.
Although it’s hard to know if it can compete like this NVIDIAThis will be an interesting development to monitor closely. This could serve as a major tailwind for the stock or be a potential disappointment.
Another area of the AI supply chain for which Vinh expects to see increasing demand is memory, specifically referring to dynamic random access memory (DRAM) and NAND, a type of non-volatile storage technology. DRAM is the critical memory that the GPU uses to temporarily access data, which is important for multitasking. NAND is a more permanent form of data storage. Devices such as smartphones use NAND to perform tasks such as storing photos even when the phone is turned off.
Due to the AI boom, Micron has seen intense demand for memory, driving up prices and sending the stock price up more than 450% in the past year. Vinh sees more supply shortages ahead. As a result, the analyst thinks DRAM and NAND prices will rise 30% to 50% in the second quarter of the year, although Vinh is increasingly concerned that customers can only tolerate so many price increases.
Still, Vinh said Micron is about to implement long-term deals with customers, which should be positive overall. “We view the structure of these LTAs (long-term agreements) as extremely favorable for memory producers as it addresses the shortcomings of previous LTAs, which were easily broken, and potentially reduces downcycle risk,” Vinh wrote in his note.
Micron is one of three memory manufacturers that dominate the market, so it has a degree of moat.
However, as Vinh correctly points out, memory makers are also considered very cyclical, which is why the stock has seen some pressure recently. LTA should mitigate this to some extent, and the current environment is certainly favorable for Micron, but it is hard to predict how long this cycle will last.
The stock is already up quite a bit this year and compared to last, so I think investors can buy it, but I don’t see the need to make it a big position right now.
Before buying stock in Micron Technology, consider this:
Motley Fool Stock Advisor The analyst team has just identified what they believe 10 best stocks For investors to buy now… and Micron Technology wasn’t one of them. The 10 stocks that made the cut could deliver tremendous returns in the coming years.
consider when Netflix This list was created on December 17, 2004… If you invested $1,000 at the time of our recommendation, You will have $555,526!* or when NVIDIA This list was created on April 15, 2005… If you invested $1,000 at the time of our recommendation, You will have $1,156,403!*
Now, it’s worth noting stock advisor The total average return is 968% – Outperformance of the market compared to 191% for the S&P 500. Don’t miss the latest top 10 list available with stock advisorAnd join an investment community built by individual investors for individual investors.
bram berkowitz No positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel, Micron Technology, and Nvidia. The Motley Fool has one Disclosure Policy.
