Technology stocks have plunged big time in 2022, with the Nasdaq-100 Technology Sector index down nearly 35% so far this year thanks to a hawkish Federal Reserve that's hiking interest rates in a bid to keep surging inflation in check.
The sharp decline in tech stocks has brought some high-flying names crashing into the ground this year. The likes of Micron Technology$Micron Technology(MU)$ (MU-0.24%) and amd$AMD(AMD)$ have borne the brunt of the stock market sell-off in 2022.
However, a closer look at the markets that these companies serve indicates that they could regain their mojo and deliver terrific upside in the long run. It wouldn't be surprising to see the likes of Micron turn a $10,000 investment into $100,000 by the end of the decade. Let's see why.
Memory specialist Micron Technology is a chipmaker that could give investors' portfolios a big boost in the long run. That's because the chipmaker is making the most of the lucrative opportunity in the market for dynamic random-access memory (DRAM) and NAND flash memory chips.
Micron has delivered healthy growth in revenue and earnings this fiscal year. For the first six months of fiscal 2022, Micron's revenue has shot up nearly 29% over the prior-year number to $15.5 billion, while net income more than tripled to $4.57 billion. The company is benefiting from favorable developments in the memory market, which are likely to continue as demand for DRAM and NAND flash memory grows.
The DRAM market, for instance, is expected to hit nearly $222 billion in revenue by 2030, clocking a compound annual growth rate of 9.2% through the end of the decade. The NAND flash memory market, on the other hand, is expected to hit $95 billion in revenue by 2027, compared to $66 billion last year. Micron is pulling the right strings to corner a bigger share of these markets.
For example, Micron will reportedly start producing its memory chips using extreme ultraviolet (EUV) lithography later this year. This move will allow the chipmaker to shrink the size of its memory chips. The company reportedly manufactures its current DRAM chips based on an 11nm-13nm manufacturing node. The move to EUV lithography will allow it to make chips using a sub-10nm process node.
Chips made using a smaller process node are supposed to be more powerful, power-efficient, and cheaper to manufacture. This could pave the way for Micron tomake better memory chipsthan its rivals and help the chipmaker take share away from the likes of Samsung and SK Hynix, its two main competitors in this space.
The massive end-market opportunity and Micron's product development moves indicate why analysts are upbeat about the company's prospects. They expect its earnings to clock a compound annual growth rate of nearly 30% over the next five years. If Micron maintains a similar growth rate through the end of the decade, its earnings could jump to $64 per share, compared to $6.06 per share in fiscal 2021.
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