The Magnificent Seven technology stocks soared in recent years, leading gains in the S&P 500 — many of them play a major role in artificial intelligence (AI), a technology that has sparked investors’ interest. AI has the potential to revamp the way companies operate, and this could lead to cost savings, growth, and innovation.
These gains pushed valuations of the Magnificent Seven higher, but over the past few weeks, the market has shifted. Concerns about general economic growth, as well as the rapid pace of spending on AI, have weighed on stock performance, lowering the valuations of many of these market giants. In fact, some of them have fallen into bargain territory.
But members of the Magnificent Seven aren’t the only deals in town. Is the following AI stock actually a better bargain? Let’s find out.
Image source: Getty Images.
The seven tech giants
So first, let’s identify the seven tech giants that have captured investors’ attention in recent years. They are: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. They are each leaders in their respective areas, from internet search with Alphabet to AI chip design with Nvidia.
And companies such as Nvidia and Alphabet indeed look like bargains today. But another AI stock is even cheaper, and that’s Micron Technology (MU 6.97%).
MU PE Ratio (Forward) data by YCharts
Micron also has seen earnings and stock performance soar thanks to its position in the AI market. The company offers memory solutions, including DRAM, NAND, and high bandwidth memory (HBM), and it’s seeing explosive demand. In the latest quarter, Micron’s revenue jumped more than 190% year-over-year to $23 billion, a record level, and the company also reported records in gross margin, earnings per share, and free cash flow.
The need for memory
Customers need memory for their AI workloads, and as AI is applied more and more to real-world problems, demand may continue to climb. The next stage of AI growth is this use of AI, and it involves a process called inference — the “thinking” a large language model does to solve problems. This process is ongoing, and it requires memory.
Today’s Change
(-6.97%) $-26.63
Current Price
$355.46
Key Data Points
Market Cap
$401B
Day’s Range
$350.00 – $374.25
52wk Range
$61.54 – $471.34
Volume
57K
Avg Vol
38M
Gross Margin
58.54%
Dividend Yield
0.13%
All of this suggests that Micron could continue to deliver significant earnings growth as the AI story progresses.
So, is the stock a better bargain buy right now than the Magnificent Seven? I recently wrote about why, if I had to choose, I would favor buying Nvidia over Micron. It’s also important to take into account your investment style and comfort with risk when choosing a stock. Still, if we consider the Magnificent Seven as a whole, Micron may be a better bargain — and, particularly for growth investors, makes a great AI stock to buy now.
Adria Cimino has positions in Amazon and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Micron Technology, Microsoft, Nvidia, and Tesla and is short shares of Apple. The Motley Fool has a disclosure policy.