The "Magnificent Seven's" Capex Supercycle Has Given Birth to 2 Millionaire-Maker Stocks Hiding in Plain Sight. Here's the Best of the Bunch
Key Points
Micron Technology and Dell Technologies have been witnessing healthy growth in revenue and earnings in recent quarters.
Both stocks are trading at attractive valuations, and the solid long-term growth opportunities in memory chips and AI servers should enable them to sustain their red-hot momentum.
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The enormous spending on artificial intelligence (AI) infrastructure isn't showing any signs of slowing, as major U.S. hyperscalers continue to aggressively build new data centers to run AI workloads in the cloud.
Hyperscalers such as Amazon, Microsoft, Alphabet's Google, and Meta Platforms, which are part of the Magnificent Seven, are poised to significantly increase their capital spending to support the rollout of AI infrastructure. The combined capital expenditure of these four companies is on track to reach a record $725 billion this year, an increase of 77% over last year, according to the Financial Times.
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Investors can capitalize on this massive outlay by investing in Micron Technology (NASDAQ: MU) and Dell Technologies (NYSE: DELL), which appear to be ideal fits for anyone looking to build a million-dollar portfolio, given their stunning growth and cheap valuations. Let's take a closer look at their prospects and check which of these two AI stocks is the better buy.
Image source: Getty Images.
Micron Technology and Dell Technologies are winning big from the infrastructure supercycle
A supercycle refers to a persistent period of economic expansion, fueled by strong demand for products and services that exceed supply. The AI infrastructure supercycle has also created major shortages in a few industries, creating an ideal environment for Micron and Dell to thrive in.
Micron makes memory chips, which are in red-hot demand right now. The high-bandwidth memory (HBM) that Micron makes is used in AI accelerator chips to quickly transport massive data sets while keeping energy consumption in check. Bloomberg predicts that the HBM market could clock a 42% annual growth rate through 2030. As HBM needs 3x the wafer capacity of conventional memory chips, robust expansion in this market should ensure that the strong pricing environment fueling Micron's growth persists.
Data by YCharts
On the other hand, demand for Dell's AI-optimized servers is also exceeding supply. The company recognized $16.1 billion in AI server revenue in the previous quarter, but it booked orders worth $24.4 billion. As a result, Dell ended the quarter with an AI server revenue backlog of $51.3 billion.
It is worth noting that Dell's growth rate has picked up due to booming AI server demand, a trend that's likely to continue, given the 35% annual growth predicted in this market through 2034, according to Fortune Business Insights.
Data by YCharts
Both stocks are solid buys, but there is a clear winner if you want to buy just one
Dell and Micron can sustain their phenomenal growth rates over the long run. I won't be surprised to see both of them becoming multibaggers in the future. However, Micron's earnings growth is predicted to be significantly higher than Dell's due to the sharp increase in memory prices.
Data by YCharts
Also, the chart above shows that Micron is cheaper than Dell. So, Micron seems like the better bet to capitalize on the AI infrastructure boom of the two, though you won't regret buying Dell stock either if you're looking to construct a million-dollar portfolio.
Should you buy stock in Micron Technology right now?
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Micron Technology, and Microsoft. The Motley Fool has a disclosure policy.
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