Key insights
- Wall Street analysts are recommending a buy on Nvidia and a sell on Micron, despite both stocks being significant winners in the AI infrastructure build-out. Nvidia's dominance in AI accelerators, reinforced by its new Grace Blackwell and upcoming Vera Rubin superchips, is highlighted. The company reported strong Q1 earnings with significant revenue and net income growth, positioning it well for future momentum. This divergence in analyst sentiment suggests potential shifts in investor focus towards Nvidia's perceived stronger competitive advantages and future product pipeline.
To date, Nvidia (NVDA +2.13%) and Micron Technology (MU +8.29%) are two of the biggest winners from the artificial intelligence infrastructure build-out. The stocks have added 1,320% and 1,940%, respectively, since January 2023. But most Wall Street analysts think one of the two is overvalued.
The Wall Street consensus implies investors should buy Nvidia and sell Micron at current prices. Here are the details you need to make an educated decision.
Nvidia's graphics processing units (GPUs) are the industry standard in accelerating artificial intelligence (AI) workloads. Nvidia systems consistently achieve better results than alternative infrastructure solutions at the MLPerf benchmarks, a series of standardized tests that measure how AI systems perform across training and inference tasks.
Nvidia accounts for nearly 90% of AI accelerator sales, and the company has reinforced its dominance with Grace Blackwell, a superchip that combines Grace CPUs and Blackwell GPUs. That unified architecture eliminates data transfer bottlenecks by creating a shared memory pool. Nvidia CFO Colette Kress says Grace Blackwell is the fastest, most efficient AI training and inference system on the market.
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Nvidia reported solid first-quarter financial results. Revenue rose 85% to $81.6 billion, because of strong demand for data center compute and networking products. And non-GAAP net income increased 140% to $1.87 per diluted share. The company is well positioned to maintain its momentum as its next-generation Vera Rubin superchip starts shipping later this year.
Vera Rubin is 10 times more efficient than Grace Blackwell. "Every single frontier model company will jump on Vera Rubin from the get-go. That was not true before on Blackwell," CEO Jensen Huang recently told analysts. "So, Vera Rubin is off to a tremendous start, and it will surely be more successful than even Grace Blackwell."
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Looking ahead, Nvidia has a long runway for growth. The AI infrastructure market is forecast to hit $4 trillion by 2030, nearly quadruple its size today. Nvidia currently trades at 32 times earnings, essentially its cheapest valuation in seven years. That price looks particularly attractive because Wall Street estimates adjusted earnings will increase at 43% annually through fiscal 2029 (ends in January).
Micron designs memory and storage solutions across four end markets: consumer devices (computers and smartphones), automotive systems, enterprise data centers, and cloud hyperscalers. Its portfolio includes NAND (long-term storage) and DRAM (working memory) products, both of which support AI workloads.
Micron reported second-quarter financial results that crushed estimates on the top and bottom lines. Sales increased 196% to $23.8 billion, driven by particularly strong growth in the consumer and enterprise data center end markets. Non-GAAP net income increased 682% to $12.20 per diluted share.
However, Micron lacks a durable economic moat because memory chips are commodities, meaning products from different manufacturers are mostly interchangeable. While Micron is growing very quickly, the driving force behind that growth has been price increases supported by a severe supply shortage.
However, higher prices have been even more beneficial for the industry leaders Samsung and SK Hynix, both of which gained market share at Micron's expense in the most recent quarter. And the industry dynamics are unlikely to change, at least not in the near future, because Samsung and SK Hynix have a key advantage in greater production capacity.
Importantly, the memory chip industry has historically alternated between boom and bust cycles. Wall Street expects the current boom to peak in 2028, implying that sales will drop sharply in 2029. Accounting for that headwind, Micron's adjusted earnings are forecast to increase at 13% annually through fiscal 2029 (which ends in August). That makes the current valuation of 48 times earnings look quite expensive.