Tag: Advanced Micro Devices

Why TSMC Is Essential to the AI Ecosystem: An Investor’s Perspective

Posted on by The INO.com Team

Taiwan Semiconductor Manufacturing Company Limited (TSM), valued at $866.70 billion market cap, is a cornerstone of the global semiconductor industry and is increasingly pivotal to the rapidly evolving artificial intelligence (AI) ecosystem. As the world’s largest pure-play semiconductor foundry, TSMC’s role in AI innovation and development is profound and indispensable.

This article explores why TSMC is crucial to the AI ecosystem and why investors should closely monitor this semiconductor giant.

Vital Role of TSMC in the AI Revolution

TSM, headquartered in Hsinchu City, Taiwan, is the world’s leading semiconductor foundry. The company nurtures a dynamic ecosystem of global customers and partners by offering the industry’s leading process technologies and a portfolio of design enablement solutions, driving innovation across the global semiconductor sector.

The company’s commitment to research and development (R&D) is a key driver of its success. TSMC invests heavily in developing new process technologies and enhancing its manufacturing capabilities. The continuous innovation enables TSMC to meet the evolving needs of AI applications and maintain its competitive edge. For investors, TSMC’s focus on R&D represents a strong growth driver and a safeguard against technological obsolescence.

TSMC offers the most advanced and extensive range of dedicated foundry process technologies, including 2nm technologies, 3nm technology, 5nm technology, and 7nm technology, among others. This comprehensive portfolio supports several applications, from cutting-edge consumer electronics to high-performance computing and AI-driven innovations.

At its 2024 North America Technology Symposium in April, the chip giant introduced its latest semiconductor process, advanced packaging, and 3D IC technologies, showcasing its silicon leadership for the next wave of AI innovations. It debuted the TSMC A16™ technology, which features cutting-edge nanosheet transistors with an innovative backside power rail solution, set for production in 2026. The new technology promises significant enhancements in logic density and performance.

Meanwhile, expanding the reach of TSMC’s advanced technology to a broader range of applications, the company announced N4C, an extension of the N4P technology with up to an 8.5% reduction in die cost and minimal adoption effort, and is slated for volume production in 2025.

Additionally, TSMC introduced its System-on-Wafer (TSMC-SoW™) technology, a groundbreaking solution designed to deliver revolutionary performance to the wafer level in addressing the future AI needs of hyperscaler data centers. Also, the company is advancing its Compact Universal Photonic Engine (COUPE™) technology to support the rapid increase in data transmission demands driven by the AI boom.

Moreover, major tech companies, includingc, Advanced Micro Devices, Inc. (AMD), and Apple Inc. (AAPL), rely on TSMC for the production of their most advanced processors and GPUs.

Second-Quarter 2024 Revenue and Profit Beat Analyst Expectations

TSM’s revenue and earnings surpassed analyst estimates in the second quarter of 2024 as demand for advanced chips utilized in AI applications continues to rise. For the second quarter that ended June 30, 2024, the company’s net revenue increased 40.1% year-over-year to $20.82 billion. That beat analysts’ revenue estimate of $20.09 billion.

During the second quarter, the company’s shipments of 3-nanometer made up 15% of total wafer revenue, 5-nanometer accounted for 35%, and 7-nanometer constituted 17%. Advanced technologies, defined as 7-nanometer and more advanced technologies, accounted for 67% of total wafer revenue.

The company’s gross profit was $11.07 billion, up 37.6% from the previous year’s quarter. TSMC’s non-GAAP income from operations rose 41.9% year-over-year to $8.86 billion. Its net income and earnings per ADR came in at $7.66 billion and $1.48, increases of 36.3% year-over-year, respectively. Its earnings per ADR compared to the consensus estimate of $1.42.

As of June 30, 2024, TSMC’s cash and cash equivalents were $55.38 billion, and its total assets amounted to $184.13 billion.

“Our business in the second quarter was supported by strong demand for our industry-leading 3nm and 5nm technologies, partially offset by continued smartphone seasonality,” said Wendell Huang, Chief Financial Officer of TSMC. “Moving into third quarter 2024, we expect our business to be supported by strong smartphone and AI-related demand for our leading-edge process technologies.”

Furthermore, TSMC expects third-quarter revenue between $22.40 billion and $23.20 billion. That compares to $17.30 billion in revenue reported in the same period of 2024. The company’s gross profit margin is projected to be between 53.5% and 55.5%, and its operating profit margin is expected to be between 42.5% and 44.5%.

Bottom Line

TSMC remains a prominent player in the rapidly expanding AI ecosystem. As the world’s largest pure-play semiconductor foundry, TSMC’s leadership in advanced process technologies and commitment to continuous innovation ensure its pivotal role in powering next-generation AI applications.

The company’s comprehensive range of dedicated foundry process technologies, including industry-leading 2nm, 3nm, and 5nm technologies, alongside recent breakthroughs such as the TSMC A16™ and System-on-Wafer (TSMC-SoW™) technologies, underscores its strategic importance for shaping the future of AI.

The impressive financial performance in the second quarter of 2024, where revenue and EPS surpassed analyst expectations, highlights TSMC’s strong market position and resilience. As demand for advanced chips continues to surge, particularly in AI and high-performance computing, TSMC’s innovative solutions and robust financial health position it well for sustained growth and profitability.

Susquehanna analyst Mehdi Hosseini maintained Positive on TSM shares, with a price target of $250. Moreover, in July, Needham reaffirmed a Buy rating on shares of TSM with a price target of $210.

Amid this backdrop, investors could consider adding TSMC to their portfolio, particularly if they want to gain exposure to the burgeoning AI sector. However, it is also essential to remain mindful of potential risks, including geopolitical tensions and market fluctuations, which could impact the semiconductor industry.

Is Intel a Buy? Deep Dive into Software Expansion and AI Aspirations

Posted on by The INO.com Team

Intel Corporation (INTC), a global leader in designing and manufacturing semiconductor products, is making headlines with its ambitious goals for software expansion. Chief Technology Officer (CTO) Greg Lavender told Reuters that Intel’s push into software is progressing well, with the company potentially achieving cumulative software revenue of $1 billion by the end of 2027.

Progress in Building a Software Business

INTC has been steadily growing its software capabilities. The company generated over $100 million in software revenue in 2021, the year Greg Lavender was brought in from cloud computing firm VMware, Inc. (VMW) by CEO Pat Gelsinger to lead Intel’s software strategy. Since then, the chipmaker has acquired three software companies. It highlights Intel’s strategic pivot towards becoming a significant player in the software market, complementing its traditional hardware dominance.

Intel, which reported $54 billion in revenue in 2023, offers a variety of software services and tools, ranging from cloud computing to artificial intelligence (AI). Lavender stated that his strategy is centered on providing services in AI, performance, and security, with the company making significant investments in all three areas.

The chipmaker's investment in AI is particularly noteworthy. INTC’s upcoming Gaudi 3 chip is expected to generate significant demand, potentially positioning the company as a major contender in the AI chip market. Intel said it expected over $500 million in sales from its Gaudi 3 chips in the second half of the year.

Powered by the high-efficiency Intel® Gaudi® platform and boasting proven MLPerf benchmark performance, Intel® Gaudi® 3 AI accelerators are designed to tackle demanding training and inference tasks. Recently, Intel announced pricing for Intel® Gaudi® 2 and Intel® Gaudi® 3 AI accelerator kits, which redefine power, performance, and affordability.

A standard AI kit, including Intel Gaudi 2 accelerators with a universal baseboard (UBB), is offered to system providers at $65,000, estimated to be one-third the cost of comparable competitive platforms. Also, a kit including eight Intel Gaudi 3 accelerators with a UBB will cost $125,000, expected to be two-thirds the cost of comparable competitive platforms.

NVIDIA Corporation (NVDA) currently dominates this space, controlling about 83% of the data center chip market in 2023. However, INTC’s focus on developing versatile and efficient AI processors could challenge NVDA’s dominance.

Positioning as a Leader in the Tech Industry

Intel’s comprehensive approach to AI software development could significantly enhance its position in the technology industry. CTO Greg Lavender mentioned that Intel is backing open-source initiatives to create software and tools capable of powering a diverse array of AI chips, with further breakthroughs anticipated in the upcoming months.

A crucial part of NVDA’s success is attributed to its proprietary software, CUDA, which binds developers to Nvidia chips. However, France’s antitrust regulator is preparing to charge Nvidia with suspected anti-competitive practices. The regulatory body voiced concerns about the generative AI sector’s reliance on CUDA.

Intel is a part of the UXL Foundation, a consortium of technology companies working on an open-source project that aims to make computer code run on any machine, regardless of the underlying chip and hardware. Other notable members of this consortium include Qualcomm Inc (QCOM), Samsung Electronics, and Arm Holdings plc (ARM).

Furthermore, INTC is actively contributing to Triton, an initiative led by OpenAI to develop an open-source programming language designed to improve code efficiency across AI chips. This project is also supported by Advanced Micro Devices, Inc. (AMD) and Meta Platforms, Inc. (META). Triton is already operational on Intel’s existing graphics processing units and will be compatible with the company's next generation of AI chips.

“Triton is going to level the playing field,” Lavender said, emphasizing the potential impact of this initiative.

By contributing to open-source projects like Triton and the UXL Foundation, Intel aims to create a more inclusive and competitive AI ecosystem. This strategy boosts INTC’s technological capabilities and strengthens its reputation as a forward-thinking company willing to invest in the broader tech community.

Robust First-Quarter Performance but Weak Second-Quarter Forecast

For the first quarter that ended March 30, 2024, INTC’s net revenue increased 8.6% year-over-year to $12.72 billion, primarily driven by growth in its personal computing, data center, and AI business. Revenue from the company’s biggest business, Client Computing Group (CCG), which is responsible for chips for PCs and laptops, grew 31% year-over-year to $7.50 billion.

Intel’s Data Center and AI business, which makes central processors for servers and other parts and software, reported sales of $3 billion, up 5% year-over-year. The company continues to compete for server market share against well-established chipmakers like Nvidia.

Further, the company’s gross margin rose 30.2% from the prior year’s quarter to $5.22 billion. INTC’s non-GAAP operating income came in at $723 million, compared to an operating loss of $294 million in the previous year’s quarter. Its non-GAAP net income and earnings per share were $759 million and $0.18, compared to a net loss and loss per share of $169 million and $0.04, respectively, in the same period of 2023.

The chipmaker gave weak guidance for the second quarter. For the quarter that ended June 2024, Intel expects its revenue to come between $12.50 billion and $13.50 billion, and its non-GAAP earnings per share is anticipated to be $0.10.

Meanwhile, analysts expect INTC’s revenue for the second quarter to increase marginally year-over-year to $12.99 billion. The company’s EPS is expected to decline 21.6% year-over-year to $0.10 for the same period.

Bottom Line

Intel’s strategic shift towards expanding its software capabilities, primarily focusing on AI and cybersecurity, is setting the stage for substantial future revenue growth. The company’s progress in building a robust software business, evidenced by the significant revenue surge and strategic acquisitions over the years, highlights a promising growth trajectory.

By focusing on AI, performance, and security areas and making significant investments, Intel is diversifying its revenue streams and positioning itself as a formidable player in the tech industry. The company’s executives hinted at robust demand for its upcoming Gaudi 3 chip, which can help Intel take second place in the AI chip market.

While INTC’s involvement in open-source initiatives like Triton and the UXL Foundation, collaboration with industry leaders, and continuous innovation underscores its commitment to fostering a competitive and inclusive AI ecosystem, Nvidia’s dominance in the data center chip market is pronounced and presents a significant challenge.

Intel’s solid first-quarter performance reflects the effectiveness of its strategic initiatives, but its dim second-quarter guidance indicates some short-term challenges. Analysts predict a slight year-over-year revenue increase but a notable EPS decline for the second quarter. While it may face hurdles in the immediate future, INTC’s long-term prospects appear promising, driven by its software expansion and strategic investments in AI.

Cantor Fitzgerald reiterated a Neutral rating on INTC stock while maintaining a price target of $40. Also, TD Cowen reiterated coverage on Intel with a Neutral rating and set a new price target of $40 from $45 previously. Given this backdrop, it seems wise to wait for a better entry point in INTC now.

Investing Amidst the $100B China Chip War

Posted on by The INO.com Team

In a move set to reshape the global semiconductor landscape, China's ambitious $100 billion investment spree into its semiconductor industry is poised to disrupt Western chipmakers’ foothold in the lucrative Chinese market.

According to a recent report by the European Commission highlighted by Bloomberg, concerns are mounting over the potential erosion of market share for companies like NXP Semiconductors N.V. (NXPI), Infineon Technologies AG (IFNNY), and ASML Holding N.V. (ASML). These firms, pivotal players in microcontroller technology essential for automobiles, industrial applications, and consumer electronics, face intensifying competition from burgeoning Chinese counterparts.

The European Commission's report underscores that China's strategic maneuvers, including non-tariff barriers and local content requirements, could favor domestic microcontroller manufacturers. This advantage is particularly potent in China's burgeoning electric vehicle market, posing challenges for European and Japanese chip suppliers.

Moreover, China's aggressive investment surge follows heightened geopolitical tensions, including U.S. sanctions limiting Chinese access to high-end chips. Despite these restrictions, China has reportedly found alternative routes to procure U.S. technology, underscoring its determination to achieve semiconductor independence. As China makes aggressive investments in semiconductor fabrication plants and encourages local procurement of key semiconductor components, the ripple effects are felt globally.

Investors navigating this evolving landscape should consider diversifying across sectors and exploring resilient segments within tech. Despite China's semiconductor ambitions and geopolitical tensions, investing in solid companies like Advanced Micro Devices, Inc. (AMD) and Intel Corporation (INTC) could provide stability and growth potential.

Let’s look at the fundamentals of the abovementioned stocks in detail:

Stocks to Buy:

Advanced Micro Devices, Inc. (AMD)

Prominent chip giant AMD offers x86 microprocessors, graphics processing units (GPUs), and innovative solutions across Data Center, Client, Gaming, and Embedded segments. AMD also develops embedded processors, semi-custom system-on-chip (SoC) products, and advanced technologies like field programmable gate arrays (FPGA) and adaptive SoCs.

In the first quarter that ended March 30, 2024. AMD’s net revenue increased 2.2% year-over-year to $5.47 billion. Both its Data Center and Client segments experienced substantial growth, each exceeding 80% year-over-year, fueled by the uptake of MI300 AI accelerators and the popularity of Ryzen and EPYC processors.

Moreover, the company’s non-GAAP operating income grew 3.2% from the year-ago value to $1.13 billion. Its non-GAAP net income and earnings per share rose 4.4% and 3.3% from the prior-year quarter to $1.01 billion and $0.62, respectively.

Street expects AMD’s revenue for the second quarter (ended June 2024) to increase 6.7% year-over-year to $5.72 billion. Its EPS for the to-be-reported quarter is projected to reach $0.68, registering a 17.2% year-over-year growth. Moreover, the company surpassed the consensus revenue estimates in each of the trailing four quarters.

Intel Corporation (INTC)

INTC designs manufactures, and markets a wide range of computing products globally, including CPUs, GPUs, memory, and connectivity solutions. Known for its microprocessors, Intel powers PCs, servers, and emerging technologies across cloud, network, and edge computing platforms. It operates through segments including Client Computing Group, Data Center and AI, Network and Edge, Mobileye, and Intel Foundry Services.

The company delivered robust performance in the first quarter of 2024 (ended March 30), driven by solid innovation across its client, edge, and data center portfolios. Total Intel Products generated $11.90 billion in revenue, resulting in a 17% year-over-year increase. Revenue from the Client Computing Group (CCG) rose 31% year-over-year.

INTC’s net revenue increased 8.6% year-over-year to $12.72 billion, while its Data Center and AI (DCAI) division’s sales rose 5% to $3.04 billion. Also, the company reported a non-GAAP operating income of $723 million, compared to an operating loss of $294 million in the prior year’s quarter. Further, its non-GAAP net income and non-GAAP earnings per share came in at $759 million and $0.18 versus a net loss and loss per share of $169 million and $0.04, respectively, in the same quarter last year.

Analysts expect INTC’s revenue for the second quarter (ended June 2024) to increase marginally year-over-year to $13.02 billion. However, the consensus EPS estimate of $0.10 for the same period indicates a 19.5% year-over-year decline. Nevertheless, the company has an impressive surprise history, beating the consensus revenue estimates in three of the trailing four quarters.

Stocks to Sell:

NXP Semiconductors N.V. (NXPI)

NXPI, based in Eindhoven, the Netherlands, specializes in a diverse range of semiconductor products. Its portfolio features microcontrollers, communication processors, analog and interface devices, radio frequency power amplifiers, security controllers, and semiconductor-based environmental and inertial sensors.

For the first quarter that ended March 31, 2024, NXPI’s total revenue declined 8.6% sequentially to $3.13 billion. The company’s non-GAAP operating income fell 11.4% from the last quarter to $1.08 billion. Also, NXPI’s non-GAAP net income attributable to stockholders came in at $840 million and $3.24 per common share, down 13% and 12.7% from the preceding quarter, respectively.

Street expects NXPI’s revenue and EPS for the second quarter (ended June 2024) to decrease 5.2% and 6.5% year-over-year to $3.13 billion and $3.21, respectively. This downward trajectory is forecasted to persist throughout fiscal year 2024, with revenue and EPS expected to decrease by 1.5% and 0.3%, respectively.

Infineon Technologies AG (IFNNY)

Headquartered in Neubiberg, Germany, IFNNY is a global semiconductor leader specializing in power systems and IoT. The company drives decarbonization and digitalization with its innovative semiconductor solutions across four key segments: Automotive, Green Industrial Power, Power & Sensor Systems, and Connected Secure Systems.

During the fiscal second quarter that ended March 31, 2024, IFNNY’s revenue decreased 11.8% year-over-year to €3.63 billion ($3.94 billion), while gross profit fell by 26.9% from the year-ago value to €1.40 billion ($1.52 billion). The company’s operating profit stood at €496 million ($538.38 million), down 53.8% year-over-year.

In addition, adjusted profit for the period from continuing operations attributable to shareholders of IFNNY and adjusted EPS amounted to €551 million ($598.08 million) and €0.42, respectively, reflecting a 38.8% and 39.1% decrease from the prior-year quarter.

For the quarter ended June 2024, IFNNY’s EPS is expected to decrease 39.8% year-over-year to $0.45. Its revenue for the same quarter is expected to fall 8.2% from the prior year to $4.11 billion. Analysts project a further 7.5% decline in revenue and a 30.8% decrease in EPS for fiscal year 2024.

ASML Holding N.V. (ASML)

Based in Veldhoven, the Netherlands, ASML manufactures essential semiconductor equipment for global chipmakers. It focuses on lithography, metrology, and inspection systems, including advanced solutions like extreme ultraviolet and deep ultraviolet lithography. These technologies support semiconductor production across diverse technological ranges.

ASML’s total net sales for the first quarter that ended March 31, 2024, decreased 21.6% year-over-year to €5.29 billion ($5.74 billion). Its income from operations fell 36.9% from the year-ago value to €1.39 billion ($1.51 billion), while its net income declined 37.4% from the prior year’s quarter to €1.22 billion ($1.33 billion). In addition, the company’s net income per ordinary share stood at €3.11, down 37.2% year-over-year.

Analysts expect ASML’s revenue and EPS for the second quarter (ended June 2024) to decline by 15.6% and 27.7% year-over-year to $6.53 billion and $3.99, respectively. Likewise, the company’s EPS for the fiscal year 2024 is expected to decline 4.5% from the previous year to $20.67.

 

Intel's $8.5 Billion Gamble: Can It Rival Nvidia?

Posted on by The INO.com Team

Intel Corporation (INTC), a leading player in the semiconductor industry, is making headlines with its ambitious plans to transform its operations, spurred by a substantial $8.5 billion boost from the CHIPS and Science Act. The roughly $280 billion legislative package, signed into law by President Joe Biden in 2022, aims to bolster U.S. semiconductor manufacturing and research and development (R&D) capabilities.

CHIPS Act funding will help advance Intel’s commercial semiconductor projects at key sites in Arizona, New Mexico, Ohio, and Oregon. Also, the company expects to benefit from a U.S. Treasury Department Investment Tax Credit (ITC) of up to 25% on over $100 billion in qualified investments and eligibility for federal loans up to $11 billion.

Previously, CHIPS Act funding and INTC announced plans to invest more than $1100 billion in the U.S. over five years to expand chipmaking capacity critical to national security and the advancement of cutting-edge technologies, including artificial intelligence (AI).

Notably, Intel is the sole American company that both designs and manufactures leading-edge logic chips. Its strategy focuses on three pillars: achieving process technology leadership, constructing a more resilient and sustainable global semiconductor supply chain, and developing a world-class foundry business. These goals align with the CHIPS Act’s objectives to restore manufacturing and technological leadership to the U.S.

The federal funding represents a pivotal opportunity for INTC to reclaim its position as a chip manufacturing powerhouse, potentially rivaling giants like NVIDIA Corporation (NVDA) and Advanced Micro Devices, Inc. (AMD).

Intel’s Strategic Initiatives to Capitalize on AI Boom

At Computex 2024, INTC introduced cutting-edge technologies and architectures that are well-poised to significantly accelerate the AI ecosystem, from the data center, cloud, and network to the edge and PC.

The company launched Intel® Xeon® 6 processors with E-core (Efficient-core) and P-core (Performance-core) SKUs, delivering enhanced performance and power efficiency for high-density, scale-out workloads in the data center. The first of the Xeon 6 processors debuted is the Intel Xeon 6 E-core (code-named Sierra Forest), available beginning June 4. Further, Xeon 6 P-cores (code-named Granite Rapids) are expected to launch next quarter.

Beyond the data center, Intel is expanding its AI footprint in edge computing and PCs. With over 90,000 edge deployments and 200 million CPUs distributed across the ecosystem, the company has consistently enabled enterprise choice for many years. INTC revealed the architectural details of Lunar Lake, the flagship processor for the next generation of AI PCs.

Lunar Lake is set to make a significant leap in graphics and AI processing capabilities, emphasizing power-efficient compute performance tailored for the thin-and-light segment. It promises up to a 40% reduction in System-on-Chip (SoC) power3 and over three times the AI compute8. It is scheduled for release in the third quarter of 2024, in time for the holiday shopping season.

Also, Intel unveiled pricing for Intel® Gaudi® 2 and Intel® Gaudi® 3 AI accelerator kits, providing high performance at up to one-third lower cost compared to competitive platforms. A standard AI kit, including Intel Gaudi 2 accelerators with a UBB, is offered to system providers at $65,000. Integrating Xeon processors with Gaudi AI accelerators in a system presents a robust solution to make AI faster, cheaper, and more accessible.

Intel CEO Pat Gelsinger said, “Intel is one of the only companies in the world innovating across the full spectrum of the AI market opportunity – from semiconductor manufacturing to PC, network, edge and data center systems. Our latest Xeon, Gaudi and Core Ultra platforms, combined with the power of our hardware and software ecosystem, are delivering the flexible, secure, sustainable and cost-effective solutions our customers need to maximize the immense opportunities ahead.”

On May 1, INTC achieved a significant milestone of surpassing 500 AI models running optimized on new Intel® Core™ Ultra processors due to the company’s investment in client AI, the AI PC transformation, framework optimizations, and AI tools like OpenVINO™ toolkit. These processors are the industry’s leading AI PC processors, offering enhanced AI experiences, immersive graphics, and optimized battery life.

Solid First-Quarter Performance and Second-Quarter Guidance

During the first quarter that ended March 30, 2024, INTC’s net revenue increased 8.6% year-over-year to $12.72 billion, primarily driven by growth in its personal computing, data center, and AI business. Revenue from the Client Computing Group (CCG), through which Intel continues to advance its mission to bring AI everywhere, rose 31% year-over-year to $7.50 billion.

Furthermore, the company’s non-GAAP operating income was $723 million, compared to an operating loss of $294 million in the previous year’s quarter. Its non-GAAP net income and non-GAAP earnings per share came in at $759 million and $0.18, compared to a net loss and loss per share of $169 million and $0.04, respectively, in the same quarter of 2023.

For the second quarter of fiscal 2024, Intel expects its revenue to come between $12.5 billion and $13.5 billion, and its non-GAAP earnings per share is expected to be $0.10.

Despite its outstanding financial performance and ambitious plans, INTC’s stock has plunged more than 38% over the past six months and nearly 40% year-to-date.

Competing with Nvidia: A Daunting Task

Despite INTC’s solid financial health and strategic moves, the competition with NVDA is fierce. Nvidia’s market performance has been stellar lately, driven by its global leadership in graphics processing units (GPUs) and its foray into AI and machine learning markets. The chip giant has built strong brand loyalty among developers and enterprise customers, which could be challenging for Intel to overcome.

Over the past year, NVIDIA has experienced a significant surge in sales due to high demand from tech giants such as c, Alphabet Inc. (GOOGL), Microsoft Corporation (MSFT), Meta Platforms, Inc. (META), and OpenAI, who invested billions of dollars in its advanced GPUs essential for developing and deploying AI applications.

Shares of the prominent chipmaker surged approximately 150% over the past six months and more than 196% over the past year. Moreover, NVDA’s stock is up around 2,938% over the past five years. Notably, after Amazon and Google, Nvidia recently became the third U.S. company with a market value surpassing $3 trillion.

As a result, NVDA commands a dominant market share of about 92% in the data center GPU market. Nvidia’s success stems from its cutting-edge semiconductor performance and software prowess. The CUDA development platform, launched in 2006, has emerged as a pivotal tool for AI development, with a user base exceeding 4 million developers.

Bottom Line

Proposed funding of $8.5 billion, along with an investment tax credit and eligibility for CHIPS Act loans, are pivotal in Intel’s bid to regain semiconductor leadership in the face of intense competition, particularly from Nvidia. This substantial federal funding will enhance Intel’s manufacturing and R&D capabilities across its key sites in Arizona, New Mexico, Ohio, and Oregon.

While INTC possesses the resources, technological expertise, and strategic vision to challenge NVDA, the path forward is fraught with challenges. Despite Intel’s recent strides in the AI ecosystem, from the data center to edge and PC with products like Xeon 6 processors and Gaudi AI accelerators, Nvidia’s dominance in data center GPUs remains pronounced, commanding a significant market share.

Future success will depend on Intel’s ability to leverage its strengths in manufacturing, introducing innovative product lines, and cultivating a compelling ecosystem of software and developer support. As Intel advances its ambitious plans, industry experts and stakeholders will keenly watch how these developments unfold, redefining the competitive landscape in the AI and data center markets.

How Micron Technology Is Poised to Benefit from AI Investments

Posted on by The INO.com Team

Artificial Intelligence (AI) continues revolutionizing industries worldwide, including healthcare, retail, finance, automotive, manufacturing, and logistics, driving demand for advanced technology and infrastructure. Among the companies set to benefit significantly from this AI boom is Micron Technology, Inc. (MU), a prominent manufacturer of memory and storage solutions.

MU’s shares have surged more than 70% over the past six months and nearly 104% over the past year. Moreover, the stock is up approximately 12% over the past month.

This piece delves into the broader market dynamics of AI investments and how MU is strategically positioned to capitalize on these trends, offering insights into how investors might act now.

Broader Market Dynamics of AI Investments

According to Grand View Research, the AI market is expected to exceed $1.81 trillion by 2030, growing at a CAGR of 36.6% from 2024 to 2030. This robust market growth is propelled by the rapid adoption of advanced technologies in numerous industry verticals, increased generation of data, developments in machine learning and deep learning, the introduction of big data, and substantial investments from government and private enterprises.

AI has emerged as a pivotal force in the modern digital era. Tech giants such as Amazon.com, Inc. (AMZN), Alphabet Inc. (GOOGL), Apple Inc. (AAPL), Meta Platforms, Inc. (META), and Microsoft Corporation (MSFT) are heavily investing in research and development (R&D), thereby making AI more accessible for enterprise use cases.

Moreover, several companies have adopted AI technology to enhance customer experience and strengthen their presence in the AI industry 4.0.

Big Tech has spent billions of dollars in the AI revolution. So far, in 2024, Microsoft and Amazon have collectively allocated over $40 billion for investments in AI-related initiatives and data center projects worldwide.

DA Davidson analyst Gil Luria anticipates these companies will spend over $100 billion this year on AI infrastructure. According to Luria, spending will continue to rise in response to growing demand. Meanwhile, Wedbush analyst Daniel Ives projects continued investment in AI infrastructure by leading tech firms, “This is a $1 trillion spending jump ball over the next decade.”

Micron Technology’s Strategic Position

With a $156.54 billion market cap, MU is a crucial player in the AI ecosystem because it focuses on providing cutting-edge memory and storage products globally. The company operates through four segments: Compute and Networking Business Unit; Mobile Business Unit; Embedded Business Unit; and Storage Business Unit.

Micron’s dynamic random-access memory (DRAM) and NAND flash memory are critical components in AI applications, offering the speed and efficiency required for high-performance computing. The company has consistently introduced innovative products, such as the HBM2E with the industry’s fastest, highest capacity high-bandwidth memory (HBM), designed to advance generative AI innovation.

This month, MU announced sampling its next-generation GDDR7 graphics memory with the industry’s highest bit density. With more than 1.5 TB/s of system bandwidth and four independent channels to optimize workloads, Micron GDDR7 memory allows faster response times, smoother gameplay, and reduced processing times. The best-in-class capabilities of Micro GDDR7 will optimize AI, gaming, and high-performance computing workloads.

Notably, Micron recently reached an industry milestone as the first to validate and ship 128GB DDR5 32Gb server DRAM to address the increasing demands for rigorous speed and capacity of memory-intensive Gen AI applications.

Furthermore, MU has forged strategic partnerships with prominent tech companies like NVIDIA Corporation (NVDA) and Intel Corporation (INTC), positioning the company at the forefront of AI technology advancements. In February this year, Micron started mass production of its HBM2E solution for use in Nvidia’s latest AI chip. Micron’s 24GB 8H HBM3E will be part of NVIDIA H200 Tensor Core GPUs, expected to begin shipping in the second quarter.

Also, Micron's 128GB RDIMMs are ready for deployment on the 4th and 5th Gen Intel® Xeon® platforms. In addition to Intel, Micron’s 128GB DDR5 RDIMM memory will be supported by a robust ecosystem, including Advanced Micro Devices, Inc. (AMD), Hewlett Packard Enterprise Company (HPE), and Supermicro, among many others.

Further, in April, MU qualified a full suite of its automotive-grade memory and storage solutions for Qualcomm Technologies Inc.’s Snapdragon Digital Chassis, a comprehensive set of cloud-connected platforms designed to power data-rich, intelligent automotive services. This partnership is aimed at helping the ecosystem build next-generation intelligent vehicles powered by sophisticated AI.

Robust Second-Quarter Financials and Upbeat Outlook

Solid AI demand and constrained supply accelerated Micron’s return to profitability in the second quarter of fiscal 2024, which ended February 29, 2024. MU reported revenue of $5.82 billion, beating analysts’ estimate of $5.35 billion. This revenue is compared to $4.74 billion for the previous quarter and $3.69 billion for the same period in 2023.

The company’s non-GAAP gross margin was $1.16 billion, versus $37 million in the prior quarter and negative $1.16 billion for the previous year’s quarter. Micron’s non-GAAP operating income came in at $204 million, compared to an operating loss of $955 million and $2.08 billion for the prior quarter and the same period last year, respectively.

MU posted non-GAAP net income and earnings per share of $476 million and $0.42 for the second quarter, compared to non-GAAP net loss and loss per share of $2.08 billion and $1.91 a year ago, respectively. The company’s EPS also surpassed the consensus loss per share estimate of $0.24. During the quarter, its operating cash flow was $1.22 billion versus $343 million for the same quarter of 2023.

“Micron delivered fiscal Q2 results with revenue, gross margin and EPS well above the high-end of our guidance range — a testament to our team’s excellent execution on pricing, products and operations,” said Sanjay Mehrotra, MU’s President and CEO. “Our preeminent product portfolio positions us well to deliver a strong fiscal second half of 2024. We believe Micron is one of the biggest beneficiaries in the semiconductor industry of the multi-year opportunity enabled by AI.”

For the third quarter of 2024, the company expects revenue of $6.60 million ± $200 million, and its gross margin is projected to be 26.5% ± 1.5%. Also, Micron expects its non-GAAP earnings per share to be $0.45 ± 0.07.

Bottom Line

MU is strategically positioned to benefit from the burgeoning AI market, driven by its diversified portfolio of advanced memory and storage solutions, strategic partnerships and investments, robust financial health characterized by solid revenue growth and profitability, and expanding market presence.

The company’s recent innovations, including HBM3E and DDR5 RDIMM memory, underscore the commitment to advancing its capabilities across AI and high-performance computing applications.

Moreover, the company’s second-quarter 2024 earnings beat analysts' expectations, supported by the AI boom. Also, Micron offered a rosy guidance for the third quarter of fiscal 2024. Investors eagerly await insights into MU’s financial performance, strategic updates, and outlook during the third-quarter earnings conference call scheduled for June 26, 2024.

Braid Senior Research Analyst Tristan Gerra upgraded MU stock from “Neutral” to “Outperform” and increased the price target from $115 to $150, citing that the company has meaningful upside opportunities. Gerra stated that DRAM chip pricing has been rising while supply is anticipated to slow. Also, Morgan Stanley raised their outlook for Micron from “Underweight” to “Equal-Weight.”

As AI investments from numerous sectors continue to grow, Micron stands to capture significant market share, making it an attractive option for investors seeking long-term growth in the semiconductor sector.