Not every artificial intelligence stock has a sky-high price. These three have excellent upside at reasonable cost. Companies closely related to the developments in artificial intelligence have been the biggest winners of the current bull market. Many stocks seem perfectly priced after zooming much higher over the past two years. Some artificial intelligence stars actually trade at rates higher than almost every Wall Street analyst projects for a year from now.Still, artificial intelligence offers lots of prospects. Wall Street analysts see several companies that might keep rising from here; big tech companies expect to increase their expenditure on artificial intelligence hardware and development in 2025 and beyond.
IMG Credit: anmj.org
1. Micron Technology—194% implied upside
Specializing in memory chips, semiconductor manufacturer Micron (MU -1.35%) is Key parts of artificial intelligence servers are its high-bandwidth memory (HBM) chips.
With a $250 price target on Micron shares, Rosenblatt analysts imply 193% upside on the stock from its price as of right now. Interestingly, this price target emerged prior to Micron's most recent first-quarter results. Although the company posted strong performance, its view let down investors and resulted in lower share value. Given the poor outlook, Rosenblatt's analysts and other Micron bulls would advise it's an even better bargain now.
For its consumer-oriented chips, Micron faces a cyclicality that presents a challenge. Customer inventory reductions from PC and smartphone vendors caused management to reduce their projection for the next quarter. Since Micron makes its own chips unlike many other chipmakers nowadays, that slowdown has a big effect on company. To create better margins over time, it thus makes large upfront investments of capital. However, if income falls short to meet its cost of capital, those gains could vanish.
The good news is that demand for its HBM chips drove its data center business to take front stage in terms of income. First quarter data center income increased 400% from year ago. By 2025, that trend will get more pronounced, resulting in notable stock upside.
There is space for that multiple to grow given shares trading at an enterprise value-to---revenue multiple of just 3.6. Notwithstanding the challenges of its consumer business, revenue growth should stay robust in 2025 and show notable profit increases. From $1.30 per share now to $8.90 in fiscal 2025 (ending in August), analysts project gains. At its price as of right now, that yields a forward P/E of less than 10. Here the stock looks like a bargain even if it doesn't climb all the way to $250 over the next year.
2. Advanced Micro Devices—106% implied upside.
With a $250 price target on Micron shares, Rosenblatt analysts imply 193% upside on the stock from its price as of right now. Interestingly, this price target emerged prior to Micron's most recent first-quarter results. Although the company posted strong performance, its view let down investors and resulted in lower share value. Given the poor outlook, Rosenblatt's analysts and other Micron bulls would advise it's an even better bargain now.
For its consumer-oriented chips, Micron faces a cyclicality that presents a challenge. Customer inventory reductions from PC and smartphone vendors caused management to reduce their projection for the next quarter. Since Micron makes its own chips unlike many other chipmakers nowadays, that slowdown has a big effect on company. To create better margins over time, it thus makes large upfront investments of capital. However, if income falls short to meet its cost of capital, those gains could vanish.
The good news is that demand for its HBM chips drove its data center business to take front stage in terms of income. First quarter data center income increased 400% from year ago. By 2025, that trend will get more pronounced, resulting in notable stock upside.
There is space for that multiple to grow given shares trading at an enterprise value-to---revenue multiple of just 3.6. Notwithstanding the challenges of its consumer business, revenue growth should stay robust in 2025 and show notable profit increases. From $1.30 per share now to $8.90 in fiscal 2025 (ending in August), analysts project gains. At its price as of right now, that yields a forward P/E of less than 10. Here the stock looks like a bargain even if it doesn't climb all the way to $250 over the next year.
2. Advanced Micro Devices—106% implied upside.
Advanced Micro Devices (AMD -1.35%) is another semiconductor stock Rosenblatt's analysts are positive on. Big tech firms use the semiconductor company's GPUs and other artificial intelligence accelerator chips to run massive language models for generative artificial intelligence applications. Also setting a $250 price target on AMD shares, Rosenblatt implied 106% upside from the price as of right now.
As tech companies expand their servers and data centers in a race to create leading-edge generative AI capability, Nvidia has been the main provider of GPUs. Nonetheless, AMD offers a good substitute for Nvidia and a quite strong second option on the market. That should guarantee it stays in the expanding market since consumers of Nvidia's artificial intelligence products will wish to avoid depending entirely on Nvidia's chip supply and stuffing all their eggs in one basket.
Over the past year, AMD rode the rising demand for GPUs and produced rather outstanding results. Driven mostly by artificial intelligence accelerators, its data center revenue increased 122% in the third quarter from a year ago. Its gross margin moved up three percentage points to reach 50%. Taken together, that produced significant profit increase—up 31% on a per-share level. That expansion might, however, be only getting started.
As AMD keeps developing its artificial intelligence chip technology and more users of AMD's products expand in their data centers, revenue growth is expected to quicken in 2025. With intentions to introduce its MI355X less than a year after the MI325X, which debuted in October of this year, AMD hastened the pace of its GPU development. Twenty-26 will see the MI400 Series available. Each will look to catch up to Nvidia and take some of its market share, so offering significant performance gains.
AMD's CPU business is doing nicely meanwhile since it is effectively gaining server market share. Its fabless approach lets it leverage the best manufacturing technologies available without significant capital costs and bring fresh goods to market more rapidly. As the chipmaker strives to create new artificial intelligence chips, that has given them a basis of expansion.
Right now, AMD shares trade 24 times forward expectations. Given the general projection for 54% earnings increase next year, that is a quite low price. Rosenblatt analysts believe 25 times earnings is a reasonable multiple for AMD, but see earnings rising to $10 per share in 2026, so establishing a $250 price target. A 25 times multiple would put shares at $164 by the end of 2025, an upside of 35% from the share price as of right now even if earnings reach the Wall Street consensus of $6.56 per share in 2026.
3. Dell ( implied 60% upside)
AMD's CPU business is doing nicely meanwhile since it is effectively gaining server market share. Its fabless approach lets it leverage the best manufacturing technologies available without significant capital costs and bring fresh goods to market more rapidly. As the chipmaker strives to create new artificial intelligence chips, that has given them a basis of expansion.
Right now, AMD shares trade 24 times forward expectations. Given the general projection for 54% earnings increase next year, that is a quite low price. Rosenblatt analysts believe 25 times earnings is a reasonable multiple for AMD, but see earnings rising to $10 per share in 2026, so establishing a $250 price target. A 25 times multiple would put shares at $164 by the end of 2025, an upside of 35% from the share price as of right now even if earnings reach the Wall Street consensus of $6.56 per share in 2026.
3. Dell ( implied 60% upside)
Although consumers most know Dell (DELL 0.37%) for its personal computers, its expanding server business has been the engine behind its most recent expansion. Dell is rapidly expanding business assembling and marketing AI-optimized servers for data centers. With servers and networking up 58% in the most recent quarter, its Infrastructure Solutions segment expanded sales 34% year over year.
Based on Loop Capital's $185 price target on the stock, as of right now the stock price shows roughly 60% upside. Many investors were disappointed when this price target arrived ahead of Dell's November third-quarter results. That sent shares lower, but it might prove to be a buying chance.
Although Dell's Infrastructure Solutions division is expanding rapidly, its PC business is dragging down otherwise. Last quarter's revenue drop in its Client Solutions division was 1% annual. Furthermore, Dell's estimate fell short of what analysts were projecting as well; it also missed their whole quarter's expected income.
Management, however, expects the PC market and conventional (non-AI) servers to undergo a refresh sometime next year, which would cause significant expansion in its lagging business segment. AI demand, meantime, won't fade anytime soon. Comparatively to the $2.9 billion in sales during the third quarter, management reported that it got $3.6 billion worth of orders for its artificial intelligence servers last quarter. Investors should see robust growth at least through fiscal 2026 (ending Jan. 2026), as its total pipeline for AI server sales over the next five quarters grew 50% sequentially.
For fiscal 2026, Dell stock trades for barely 12.2 times analysts' expectations of earnings. Given the average analyst projects Dell's earnings per share to rise by roughly 20% next year, the stock offers a fantastic value.
.jpg)
0 Comments