To The Moon

Wall Street expects the two chip stocks, which are currently trading at attractive prices, to take advantage of AI opportunities along with $NVIDIA Corp(NVDA)$ . Over the past year, AI hype has pushed up NVIDIA's stock price, the company's chips are in high demand due to their ability to train large and complex AI models.

NVIDIA's stock price has risen 222% over the past year. The good news is that due to the growing demand for AI chips deployed in servers and other applications, NVIDIA stock appears poised to maintain its impressive run.

KeyBanc Capital Markets analyst John Vinh recently raised his target price for NVIDIA from $650 to $740, representing a 30% increase from current levels.

However, NVIDIA is not the only chip stock that KeyBanc has raised its target price for. The company expects two other chip manufacturers, $Advanced Micro Devices(AMD)$ and $Micron Technology(MU)$ , to benefit from AI applications.

Let's take a look at KeyBanc's rationale for upgrading these chip stocks.

1.Advanced Micro Devices

Vinh raised his target price for AMD from $170 to $195, representing a 19% increase from current levels. The analyst noted that recent supply chain checks have found strong demand for AMD's server processors and newly launched AI accelerators.

Vinh said that AMD's MI300 series of AI accelerators could generate $8 billion in revenue by 2024, jumping from a previous estimate of $3 billion in growth to $4 billion in growth.

It's easy to see why KeyBanc has significantly raised its expectations for AMD's AI chip sales this year. AMD has been actively seeking to strengthen its supply chain in order to gain a foothold in the AI chip market. AMD's foundry partner $Taiwan Semiconductor Manufacturing(TSM)$ expects to increase its packaging capacity for advanced chips by 20% by 2024, reaching 35,000 wafers per month.

This could ultimately enable AMD to outperform expectations for its 2024 revenue growth. Analysts currently expect AMD's revenue to grow by nearly 18% to $26.7 billion this year and by 16% in 2025.

2. Micron Technology

KeyBanc raised its target price for Micron stock from $100 to $115, representing a 35% increase from current levels. The price target upgrade was driven by Micron's lucrative opportunities in the high-bandwidth memory (HBM) chip market.

As HBM is deployed in AI servers, demand for HBM is rapidly increasing. According to Foxconn, the AI server market could grow fivefold by 2027, which will also have a positive impact on HBM demand. Market research firm Gartner predicts that HBM demand could grow eightfold in the next four years.

KeyBanc's supply chain checks indicate that Micron is well-positioned to capitalize on the HBM trend with the help of NVIDIA. Micron is expected to capture a 70% share of HBM in NVIDIA's upcoming B100 data center GPU.

In addition, Micron confirmed during its December earnings call that HBM is in the final stages of qualification for multiple AI chips from NVIDIA.

With a current price-to-sales ratio of 5.7x, which is consistent with its five-year average, investors are getting a great deal on Micron stock given its growth potential. Assuming a similar price-to-sales ratio and $32 billion in revenue two years from now, Micron could be worth $182 billion.

This would represent a 95% increase from its current market cap, making Micron stock a compelling buy right now. Therefore, investors shouldn't miss out on the opportunity to buy Micron stock.