key points
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Clarity often comes after market-beating opportunities become apparent.
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There has been no let up in Artificial Intelligence (AI) infrastructure spending as hyperscalers are moving at full speed.
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The Nasdaq correction is a rare entry point for investors looking to pounce on high-quality compounders at a discount.
At the end of March, nasdaq composite (NASDAQINDEX:^IXIC) officially reached correction territory as the index fell nearly 10% from its previous high. The Nasdaq’s decline is due to broader uncertainties driven by renewed tariff concerns, geopolitical tensions in the Middle East, stubborn inflation and most importantly the ongoing rotation away from valued technology stocks.
While this turmoil is disorienting, long-term investors understand that corrections are not ultimatums – often, they are invitations. The question is not whether to buy the stock now or not, but the question is which companies should double their prices.
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In my view, the most sustainable opportunities still exist Artificial Intelligence (AI) Building infrastructure. Despite the turmoil in the macroeconomic environment, the AI revolution has not stopped or stalled. and big tech $720 billion increase in capital spending It emphasizes that the demand for AI is also showing no signs of change.
At the moment, two names are prominent among the crowd of market laggards: micron technology (NASDAQ: MU) and broadcom (NASDAQ:AVGO).
Micron and Broadcom logos.
Image source: The Motley Fool.
1. Micron is the memory engine AI models can’t live without
Each large language model (LLM) that runs an inference upgrade requires memory. High-bandwidth memory, or HBM, is that specific architecture. NVIDIABlackwell and Vera Rubin GPUs rely on transferring data between the underlying processing cluster and the memory stack.
As the model size increases, the estimation workload increases – creating a bottleneck around HBM content per server rack. Every incremental dollar spent on AI infrastructure Microsoft, alphabet, Amazon, meta platformAnd Oracle A proportional increase in memory bandwidth is required. Micron’s HBM3E and upcoming HBM4 developments help keep the company’s solutions competitive at each successive node.
The HBM market is highly fragmented, with Micron being one of only three companies able to mass-produce this technology. SAMSUNG And SK Hynix. With HBM inventory for the year already sold out and investment in manufacturing capacity increasing, Micron stands out as the company with the most aggressive ramp up in the forecast era.
On valuation, Micron trades at around 6x further earnings — a figure that looks extremely cheap when benchmarked against other AI chip stocks, which boasted forward P/E multiples of between 30 and 50 times before the Nasdaq sell-off.
MU PE Ratio (Forward) Chart
MU PE Ratio (Forward) by data YCharts
Part of the discount reflects long-standing doubts about sustainability memory supercycle. Furthermore, the release of TurboQuant – a new compression algorithm from Google – has only added fuel to the fire.
These concerns create an opportunity. Rather than relying on a single product cycle, hyperscalers’ structural demand for DRAM and NAND chips creates a floor supporting Micron’s trajectory. This is what makes the company’s growth sustainable.
Micron remains a key pillar supporting the multi-year, multi-trillion dollar infrastructure buildout. Meanwhile, the company is growing revenue at a triple-digit rate and earnings per share are expected to quadruple this year. In my view, Micron’s stock price is not falling. value trap –This is a rare mispricing.
2. Redeeming Custom Silicone
When it comes to AI anatomy, Micron is the memory backbone while Broadcom is the central nervous system. The company designs custom application-specific integrated circuits (ASICs) – known as XPUs – from Alphabet (whose tensor processing units were co-produced with Broadcom), Meta, and OpenAI.
Instead of competing with Nvidia and advanced precision instruments In the general-purpose GPU market, Broadcom discovered a different and arguably more defensible pocket in the chip sector. The company designs accelerators optimized for specific workloads and then connects these chips to networking equipment. No company specializes in both product sets on a large scale.
The durability of Broadcom’s position in the AI landscape is supported by the depth of its customer relationships and the complexity of what the company creates. Custom silicon engagements are long-term commitments. Once a hyperscaler has co-designed an XPU rooted in Broadcom’s DNA, transitioning to a competitor comes with the cost of restarting the multi-year design cycle.
in switching costs Create a moat that grows over time as infrastructure spending increases – allowing Broadcom to generate hyperscaler buildouts as well as significant AI-driven growth.
Another catalyst for Broadcom stems from the recurring cash flow the company commands through its VMware software, which provides stability and cushion for earnings should the core AI business face unpredictable variability in data center spending.
At about 28 times forward earnings, Broadcom is trading about 50% below its previous high seen late last year. While this valuation is still not entirely cheap, I think it’s reasonable for a company with the potential to ride the secular tailwind driven by Broadcom’s diversification, specialized role in the AI ecosystem, and accelerating infrastructure investments.
AVGO PE Ratio (Forward) Chart
AVGO PE Ratio (Forward) by data YCharts
If you compare with Broadcom it will be seen differently Pure-play software names offering commoditized products And with cash burning against uncertain monetization timelines, Broadcom’s current setup looks more attractive to investors with a longer-term horizon.
Should you buy stock in Micron Technology now?
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Adam Spataco Alphabet, Amazon, Meta Platform, Microsoft and Nvidia have positions. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platform, Micron Technology, Microsoft, Nvidia, and Oracle. The Motley Fool recommends Broadcom. The Motley Fool has one Disclosure Policy.
