By Shipments of artificial intelligence (AI) servers have shot up remarkably in the past couple of years as cloud service providers have been investing huge amounts of money in infrastructure that’s capable of training AI models, as well as for AI inferencing purposes to deploy those models in real-world applications.
Market research firm TrendForce estimates that the global AI server market could hit a whopping $187 billion in revenue this year, up by 69% from 2023. Several companies are already benefiting big time from this huge end-market opportunity. From chip manufacturers such as Nvidia to custom chip producers such as Broadcom and server solutions providers such as Dell Technologies, there are multiple ways to invest in the booming AI server market.
In this article, however, we will take a closer look at the prospects of Micron Technology (NASDAQ: MU) and Marvell Technology (NASDAQ: MRVL), two companies that make critical components that go into AI servers.
Micron Technology’s high-bandwidth memory chips are in terrific demand
High-bandwidth memory (HBM) is used in AI server chips such as graphics processing units (GPUs) because of its ability to enable faster transfer of data to reduce processing times and boost performance, as well as reduce power consumption. The demand for HBM is so strong that Micron says that it has sold out its entire capacity for this year and the next.
Even better, Micron management points out that it “will have a more diversified HBM revenue profile” for 2026 thanks to the new business that it has landed for its latest HBM3E chip. The chipmaker points out that it has already begun shipments of this new chip to its customers for approval.
Micron claims that HBM3E consumes 20% less power and provides 50% more capacity as compared to rival offerings. The company expects to start the production ramp of HBM3E in early 2025 and increase its output as the year progresses. Even better, Micron is confident that it will continue to gain more share in the HBM market.
Singapore-based news channel CNA points out that Micron is reportedly aiming to grab 20% to 25% of the HBM market by next year. That is likely to give Micron’s growth a big boost next year as it expects the HBM market’s revenue to jump to an impressive $25 billion in 2025 from just $4 billion in 2023.
An expansion of the end market along with Micron’s focus on grabbing a bigger share of the HBM space are the reasons the company’s revenue is expected to jump by a stunning 52% to $38 billion in the current fiscal year (which started on Aug. 30). Meanwhile, analysts are forecasting Micron’s earnings to increase to $8.94 per share from $1.30 per share in the previous year.
Micron is expected to keep growing at a terrific pace in the next fiscal year as well.
Additionally, analysts are expecting Marvell’s earnings to increase at a compound annual growth rate of 21% for the next five years. So, investors looking to get their hands on a semiconductor stock to benefit from the growing demand for custom AI chips can consider adding Marvell Technology to their portfolios. Its growth is set to accelerate thanks to the tremendous opportunity in the AI server market.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Nvidia. The Motley Fool recommends Broadcom and Marvell Technology. The Motley Fool has a disclosure policy.
Artificial Intelligence (AI) Servers Are Set to Become a $187 Billion Industry in 2024: 2 Hot Stocks That Are Set to Soar Thanks to This Massive Opportunity was originally published by The Motley Fool
