1 AI Stock to Watch in 2024

One of the biggest trends we’ve seen in recent years is the increasing use of artificial intelligence (AI) in business and personal life. This helped fuel some of the most significant stock gains last year in companies such as: nvidia, microsoftand Palantir.

But apart from these names, there are others that stand to benefit enormously from the rise of AI. micron (M.U. 0.21%)a leading memory producer, is one of them.

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Micron supplies picks and shovels to the AI ​​industry.

AI has been around for years. However, as technologies in fields such as generative AI mature and new AI-enabled services such as ChatGPT proliferate, this trend is gaining momentum. Recent advances in AI have been so significant that Bill Gates declared it one of the most important technological revolutions of his own lifetime.

While these new AI software and services are receiving most of the attention, investors should not overlook the improvements in hardware that have enabled these developments. Like its more famous colleague Nvidia, Micron is a key player in the hardware that sparked AI development.

Let’s start with memory solutions (DRAM) in data centers that enable AI systems to perform complex calculations. Complex AI algorithms typically require high levels of computation to process large amounts of data, requiring data centers to make significant investments in high-quality memory solutions, in which Micron is an expert.

But that’s only one part of the equation. Additionally, data centers must store ever-growing datasets to train these AI models. This means that demand for NAND flash memory and solid state drives (SSD), which provide high-speed storage for AI systems, will increase, which is another tailwind for Micron.

Beyond data centers, the use of AI is increasing at the edge, including PCs, smartphones, and industrial embedded sensors. Benefits such as real-time analytics, improved efficiency, and more enable growth at the edge.

For example, the gradual movement of vehicles toward autonomous driving will continue to drive demand for memory and storage as automakers expand the capabilities of advanced driver assistance systems (ADAS) in the near term and full autonomy in the longer term. It will. These developments will increase demand for more powerful and specialized memory and storage solutions.

All of this points to growth opportunities for Micron in the coming years.

Micron has plenty of funds to invest in the future

Micron is riding a huge AI tailwind. But to profit, companies must constantly invest in new technologies and build new capabilities to keep pace with industry developments. And this isn’t cheap.

To put this in perspective, Micron invested $7 billion in capital expenditures in fiscal year 2023 (FY23) and is expected to invest just over $7 billion in fiscal year 2024. It also spent $3 billion on research and development in FY23. .

Another example is to consider Micron’s commitment to invest $100 billion over the next 20 years to build the largest semiconductor manufacturing facility in the United States. The first phase of this investment is expected to cost $20 billion, expected by the end of this year. And that’s just one manufacturing facility!

Fortunately, Micron has the will and wherewithal to complete these investments. For example, over the past two fiscal years, operating cash flow has been approximately $17 billion. We also have liquidity of approximately $12 billion, including cash, short-term and long-term marketable investments, restricted cash and undrawn revolver capacity, and our debt (net of cash and short-term investments) remains low at less than $5. 10 billion.

In other words, Micron has the firepower needed to invest for growth. We can finance our investments by leveraging existing liquidity or, if necessary, by accessing the capital markets for debt and equity to reinvest profits, thanks to our strong balance sheet.

What it means for investors

The emergence of AI is expected to change lives in both personal and business environments.

Most investors are focused on the obvious winners like Microsoft. alphabetIntelligent investors will search for potential investment candidates beyond these popular names.

As one of the world’s leading memory and storage suppliers, Micron stands to benefit from increased demand for its products and solutions in the world of AI.

Smart investors should keep an eye on this fact.