Smaller Companies Still Have Room to Run in the Great AI Buildout

2023 has been a great year for big-cap tech companies, particularly those investing heavily in artificial intelligence (AI). That’s especially true for hardware companies that can provide the tools necessary to run today’s latest AI programs.

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  • Most of these massive companies are priced for perfection, however. Smaller companies, which haven’t had the investor interest yet, could be better players in the AI space, as they catch up to the big names that moved first on the AI news.

    For instance, memory chip manufacturer Micron (MU) is soaring, following better-than-expected quarterly results and analyst upgrades. The company is leaning into the growth trend in AI.

    Micron has rallied over 60 percent in the past year, lagging the triple-digit returns of traditional semiconductor companies.

    While Micron has been operating at a loss, its improving results and the AI growth potential could lead to another great year for shares in 2024.

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  • Action to take: Micron shares now trade at 10 times earnings, and revenues are up 15 percent over the past year. Shares also pay a 0.6 percent dividend.

    Improving profitability could lead to a far higher price for shares in the year ahead, making the stock a buy even now near a 52-week high.

    For traders, a longer-term uptrend is in place. The June 2024 $95 calls, last going for about $4.50, could see mid-to-high double-digit gains before expiration.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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