With only a few days left until the new year, the holiday could be a good time for investors to review their portfolios and consider potential opportunities in 2025. Artificial intelligence (AI) was a major theme in the stock market in 2024. , and the tech giant is poised to spend record amounts developing the technology over the next 12 months.
This would benefit data center chip and hardware component suppliers, as well as Nvidia. (NVDA -0.21%) likely to remain one of the biggest potential winners. But while Nvidia stock continues to hit new highs, other prominent AI chip stocks have tumbled in recent months.
Advanced Micro Devices stock price (AMD -0.97%) and Micron Technology (MU 0.60%) Both are down more than 40% from their 52-week highs, despite recently posting record AI revenues. Below, we explain why investors should consider buying both stocks during the 2025 downturn.
Image source: Getty Images.
For Advanced Micro Devices (AMD)
AMD’s chips are powering some of the world’s most popular consumer electronics products, including Sony’s PlayStation 5, Microsoft’s Xbox and even Tesla’s electric car infotainment systems. But the company also released a lineup of AI graphics processing units (GPUs) for data centers last year, which has already attracted some of Nvidia’s top customers.
AMD’s MI300X AI GPU is designed to compete with Nvidia’s industry-leading H100, and the company says customers like Meta Platforms and Oracle are using it to improve performance and reduce costs. It is said that the reduction has been achieved. AMD has also just started shipping its new MI325X GPUs, but investors are already turning their attention to the MI350 series, which starts shipping later next year.
The MI350 is designed to compete with Nvidia’s new Blackwell-based GPU, which is 30 times more powerful than the original H100 for some workloads, making it a key piece of hardware. AMD says MI350 will deliver about 35 times the performance of MI300, so early signs are promising.
In the recent fiscal third quarter of 2024 (ending September 28), AMD’s data center revenue reached a record $3.5 billion, up 122% year-over-year, driven by GPU sales. AMD CEO Lisa Su says the company will generate about $5 billion in GPU revenue for the entire 2024 fiscal year, compared to the $2 billion she expected at the beginning of the year. 150% higher.
AMD also saw client revenue increase 29% to $1.9 billion in the quarter. This accounts for sales of Ryzen AI chips for personal computers (PCs) and could be a major source of growth for the company in the coming years.
Unfortunately, AMD’s strong performance in AI was offset by weakness in other segments, such as gaming, where revenue was down 69% year over year. That’s part of the reason AMD stock is down from its 52-week high. However, the company expects the gaming industry to recover by launching a new generation of chips in 2025.
Additionally, AMD’s valuation has become too much for investors to ignore. According to Wall Street consensus estimates, the company could generate earnings of $5.13 per share during the upcoming fiscal year 2025. This puts the company’s stock at a forward price-to-earnings ratio of just 24.4 times, which is a 22% discount compared to its price-to-earnings ratio. Nvidia’s expected PER:
Data by YCharts.
Investors looking for value in the AI GPU space should consider buying AMD stock heading into 2025, especially as it also provides exposure to the emerging AI PC market. This could be the next frontier in the hardware space, as more AI workloads are processed on-device while reducing dependence on external data centers.
Micron Technology Case
Micron is a leading supplier of memory and storage chips that are increasingly important in AI workloads. Memory chips complement GPUs designed by Nvidia and AMD by storing information in a ready state for quick recall. This is important for data-intensive AI workloads.
Micron’s HBM3E (High Bandwidth Memory) is the best in the industry for these applications. Nvidia chose it to power its new Blackwell-based GB200 GPU because it provides 50% more capacity while consuming 30% less energy than competing hardware. Micron is now fully sold out of its data center memory chips by 2026 and is already working on an HBM4E solution that will deliver an additional 50% performance increase.
In its most recent fiscal first quarter of 2025 (ending Nov. 28), Micron generated $4.4 billion in data center revenue. This was a staggering 400% increase compared to the same period last year. It was also the first time that the data center division accounted for more than half of the company’s total revenue ($8.7 billion in sales for the quarter).
The data center HBM market is currently worth $16 billion annually, but Micron estimates it could grow to $100 billion by 2030. So this is one of the biggest financial opportunities in the company’s history, and we’ve only just scratched the surface. Based on current earnings.
But Micron’s AI opportunities extend beyond the data center. PC and smartphone manufacturers are demanding more and more memory capacity to handle AI workloads, leading to more expensive chips and increasing revenue for Micron. The company said that PCs with AI processors require between 16 gigabytes and 24 gigabytes of DRAM memory, while the average DRAM requirement for non-AI PCs last year was 12 gigabytes.
Additionally, in recent quarters, more than 60% of smartphones equipped with Micron hardware required at least 8 gigabytes of memory, an increase from last year.
According to Wall Street consensus estimates (provided by Yahoo), Micron could generate earnings of $8.90 per share in fiscal 2025. This puts the company’s stock at a forward P/E ratio of just 10.1x, making it significantly cheaper than Nvidia and AMD. Given that the company’s HBM3E sales are directly tied to sales of Nvidia’s GB200 GPUs, which are in astronomical demand, such a deeply discounted valuation doesn’t make much sense.
As a result, I think Micron could be a great AI semiconductor stock for investors to watch heading into 2025.
Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Anthony Di Pizio has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Meta Platforms, Microsoft, Nvidia, Oracle, and Tesla. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
