Wall Street is making a clear distinction between the two biggest AI stock winners. Analysts broadly support Nvidia at its current price and consider Micron Technology to be overpriced ahead of its earnings report set for June 24.
Wall Street's price targets are making it clear. Nvidia is trading close to $210. It’s being followed by 69 analysts who estimate its true value to be $300, which is about 43% higher.
Meanwhile, Micron is a mirror image. Its price is around $1,133, but 49 analysts estimate its true value to be only $949, which is about 16% lower than its current price.
Why analysts favor Nvidia
NVIDIA accounts for nearly over 90% of the AI computing power used worldwide. The company's reported first-quarter revenue was $81.6 billion, which is 85% more than a year earlier. The next-gen Vera Rubin GPU platform is set to hit the market later this year, and CEO Jensen Huang told analysts that every major frontier model company will adopt it immediately.
Although the sentiment is strong, Nvidia is trading at 32 times its earnings, marking its cheapest valuation in seven years. Wall Street predicts adjusted earnings will grow by 43% annually until 2029.
Why analysts are cautious about Micron
Doubts about Micron stem from one structural issue: memory chips are commodities. Products from different manufacturers are largely interchangeable, meaning Micron lacks a sustainable competitive edge.
Industry leaders Samsung and SK Hynix have increased both their DRAM and NAND market shares at Micron's expense in the latest quarter. Their larger production capacity gives them a structural advantage. The HBM memory boom is expected to peak in 2028, after which sales are predicted to decline sharply.
According to The Motley Fool, Micron's adjusted earnings are expected to grow 13% annually until 2029. With the stock currently trading at 48 times its earnings, this valuation looks stretched compared to Nvidia's more attractive multiple and faster growth.
Micron's report set to drop on June 24th might shift some analysts' targets. However, the structural gap that Wall Street sees between these two stocks is unlikely to be closed based on just one earnings season.