The landscape of artificial intelligence (AI) is witnessing explosive growth, particularly in the realm of AI servers. In fact, recent projections indicate that this market could soar to an astonishing $187 billion in 2024, reflecting a staggering 69% increase from 2023. Cloud service providers are racing to enhance their infrastructure to accommodate the demands of training AI models and deploying them effectively in real-world applications, which is fueling this surge.
Leading companies like Nvidia, Broadcom, and Dell Technologies are already capitalizing on this lucrative opportunity. However, today, we’ll shine the spotlight on two noteworthy players: Micron Technology (NASDAQ: MU) and Marvell Technology (NASDAQ: MRVL). These companies manufacture essential components that drive the AI server ecosystem.
Micron Technology and the High Demand for HBM
Micron Technology is experiencing a remarkable uptick in demand for its high-bandwidth memory (HBM) chips, which are critical for AI server operations, especially in graphics processing units (GPUs). These chips enable swift data transfers that are crucial for reducing processing times and enhancing performance while minimizing power consumption. As a testament to the escalating demand, Micron has reported that it has sold out its entire HBM production capacity for this year and the next.
Looking ahead, Micron is optimistic about broadening its HBM revenue base with its latest HBM3E chip. This next-generation chip is claimed to consume 20% less power and deliver 50% greater capacity compared to competing products. The company is on track to ramp up production of HBM3E in early 2025, positioning itself to capture an impressive market share. Analysts estimate that the HBM market will grow significantly, forecasting revenues to leap from $4 billion in 2023 to approximately $25 billion by 2025.
As a result, Micron’s revenue is projected to climb by a remarkable 52% in the current fiscal year, with earnings anticipated to surge from $1.30 to $8.94 per share. This growth trajectory reinforces the value of investing in Micron as it stands on the brink of dominating the booming AI server landscape.
Marvell Technology: Pioneering Custom AI Solutions
On the flip side, Marvell Technology is making significant strides with its custom application-specific integrated circuits (ASICs), which are tailored for specific tasks within AI servers. The growing appetite for these chips from major cloud service providers such as Meta, Google, and Amazon points to a wider trend where companies are seeking to develop their own in-house processors to drive down costs.
ASICs are poised to capture 26% of the overall AI server chip market in 2024, which translates into a projected revenue potential of $150 billion. Although Marvell reported a 5% decline in overall revenue year-over-year in the second quarter of fiscal 2025, its data center segment soared by 92% to $881 million. This remarkable growth can be attributed to the ramp-up of its AI chip production, bolstered by successful partnerships with leading-tier AI customers.
Marvell expects its data center business to continue flourishing, with anticipated revenue climbing to $1.45 billion in the upcoming quarter, a notable increase from the previous year. With analysts predicting a compound annual growth rate of 21% over the next five years, Marvell’s strategic investment in AI specialized chips offers a compelling opportunity for investors.
Making Smart Investment Choices
For investors contemplating a $1,000 investment in Micron Technology, it is crucial to assess the broader market landscape. The Motley Fool’s Stock Advisor recently highlighted ten stocks that they believe are primed for exceptional performance, and while Micron was not included, the insights provided can serve as a valuable guide.
In a rapidly evolving market, keeping abreast of the key players in the AI infrastructure domain is paramount for investment success. From Micron’s cutting-edge HBM technology to Marvell’s innovative ASIC solutions, both companies are at the forefront of a transformative wave in the technology sector. As AI continues to reshape industries and enhance operational efficiencies, now may be an opportune moment for investors to consider integrating these tech giants into their portfolios.