Large tech and artificial intelligence (AI) stocks have run into a bit of a wall this year, as investors question how long the AI capital expenditure spree can continue. The Iran war hasn’t helped, either.
But among the sell-off, Wall Street analysts see buying opportunities that they think will pay off over the next 12 to 18 months. Recently, KeyBanc analyst John Vinh released several research reports highlighting buying opportunities in two stocks in the AI ecosystem: Intel (INTC +1.07%) and Micron (MU 0.22%).
- Vinh maintained an overweight rating on Intel and raised his price target from $65 per share to $70. As of April 7, the stock traded around $50 per share, indicating 35% upside.
- Vinh also reiterated an overweight rating on Micron and his $600 price target. As of this writing, Micron stock traded at about $370, implying potential upside of about 62%.
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Intel: CPU demand is growing
Intel is a hardware company that has been around for a long time, having gone public in 1971. Historically, the company was one of the largest makers of chips for personal computers, but as times have changed, the company has had to reinvent itself in the new age of AI.
The company has started to bounce back in recent years by repositioning its hardware strategy to feed the AI revolution. While graphics processing units (GPUs) are at the center of the AI story, because of their parallel processing capabilities, AI still needs central processing units (CPUs), which are the chips that can process information sequentially and fueled the traditional computer boom.
CPUs play a role in transmitting data between various GPUs. But now they are more in focus, as agentic AI and smaller language models that run more efficiently on CPUs are becoming more widely used. Furthermore, AI agents are putting more strain on CPUs, requiring more. This is where Vinh sees Intel benefiting.
Today’s Change
(1.07%) $0.66
Current Price
$62.38
Key Data Points
Market Cap
$312B
Day’s Range
$60.75 – $63.39
52wk Range
$18.25 – $63.39
Volume
99M
Avg Vol
109M
Gross Margin
35.24%
“Total demand for server[s] has gotten incrementally stronger with the rise of AI-agent-driven workloads. However, supply remains heavily constrained by limited server CPU,” Vinh wrote in a research note, adding that he expects Intel to increase prices on its CPUs by 10% to 15% in the second quarter of this year, after having just conducted a similar increase in the first quarter.
Intel has seen a nice rebound in its stock over the past year, although it is still down about 26% over the past five years. With CPU demand rising, Intel is well positioned to capitalize, so I think investors can buy the stock. Interestingly, the company is also planning to make GPUs for AI data centers.
While it’s tough to know whether it can compete with the likes of Nvidia, this will be an interesting development to closely monitor. It could serve as a major tailwind for the stock or be a potential disappointment.
Micron: Memory prices have more room to run
Another area of the AI supply chain that Vinh expects to see increased demand for is memory, specifically referring to dynamic random access memory (DRAM) and NAND, a type of non-volatile storage technology. DRAM is the critical memory GPUs use to temporarily access data, which is key to multitasking. NAND is a more permanent form of data storage. Devices like smartphones use NAND to do things like store photos even when the phone is turned off.
Due to the AI boom, Micron has seen intense demand for memory, leading to surging prices and a stock price up more than 450% in the past year. Vinh sees more supply crunch ahead. As a result, the analyst sees DRAM and NAND prices rising by 30% to 50% in the second quarter of the year, although Vinh is growing concerned that customers can only bear so many more price increases.
Today’s Change
(-0.22%) $-0.92
Current Price
$420.59
Key Data Points
Market Cap
$474B
Day’s Range
$410.05 – $423.86
52wk Range
$65.64 – $471.34
Volume
36M
Avg Vol
41M
Gross Margin
58.54%
Dividend Yield
0.12%
Still, Vinh noted that Micron is about to implement longer-term deals with customers, which should overall be positive. “We see the structure of these LTAs [long-term agreements] as extremely favorable for memory producers as it addresses the shortcomings of past LTAs, which were easily broken, and likely mitigates downcycle risk,” Vinh wrote in his note.
Micron is one of three memory makers that dominate the market, so it has a somewhat of a moat there.
However, as Vinh correctly points out, memory makers are also considered very cyclical, which is why the stock has seen some pressure lately. The LTAs should mitigate this somewhat, and the current environment is certainly favorable for Micron, but it’s tough to predict how long the cycle will last.
The stock is already up a lot this year and over the past year, so while I think investors can buy it, I don’t see the need to make it a large position right now.
