As a former electrical engineer, I’ve been interested and involved in technology since I was a teenager. That was more than 50 years ago.
I’ve managed my own investments for nearly that long as well. And I’ve seen tech bubbles come and go.
But the one we’re experiencing now is a little different from past bubbles. That’s because many of the companies caught up in this one are involved in the clean tech disruption.
This is especially true in the energy sector. We are rapidly moving from molecules to electrons.
The transportation sector is electrifying at breakneck speed. In an interview with the Financial Times, Elon Musk said, “I’m confident that we will be able to sell all the cars we can make. I mean, currently, the lead time for ordering a Tesla is ridiculously low. Our issue is not demand. It is production.”
The same is true for Ford. It’s now producing an all-electric Mustang, and it recently started rolling all models of the new electric F-150 pickup off its Dearborn, Michigan, assembly line.
The F-150 Lightning is the electric version of the most popular pickup truck on the planet. Because of soaring demand, Ford plans to double its 2023 production plans for the F-150 to 150,000 units.
Ford, like Tesla, will be able to sell as many as it can make at this point.
However, there’s one big roadblock standing in the way of auto companies churning out more vehicles – electric or otherwise…
That’s the shortage of semiconductor chips.
It’s All About Chips, Chips and More Chips
This year, the chip industry could hit $676 billion in revenues. That would be a 13.6% increase over last year.
By 2030, revenues could reach $1 trillion. That would be a compound annual growth rate of nearly 6%. But I think that estimate is going to turn out to be low.
Because this chip shortage isn’t going to end anytime soon. Intel CEO Pat Gelsinger thinks it could last well into 2024.
That’s why chipmakers are pressing Congress to pass the CHIPS for America Act.
That would funnel $52 billion to American chipmakers. The idea is to help them bring chipmaking back to the U.S.
After all, chips were invented here, at Bell Laboratories. In 1990, chip companies in the U.S. made 37% of all chips worldwide.
Now, Intel and the undervalued company I’m going to tell you about in a moment have said that they collectively plan to spend $150 billion over the next 10 years to expand their U.S. production.
This is one of my favorite companies in the chip space, and it’s selling at a ridiculously low price-to-earnings (P/E) ratio.
The Low-Priced Memory Leader
The company I’m referring to is Micron Technology (Nasdaq: MU). Right now, it’s trading at an annual projected profits level of five times earnings.
Micron makes memory devices including DRAM and NAND memory chips.
The stock is trading 24% off the 52-week high of $98.45 it reached this past January. Today it trades at a P/E ratio of just 9.3.
The demand from Micron’s markets remains strong. But the company’s biggest market is now data center applications.
It also targets the PC, automotive and Internet of Things markets. The demand for memory from these sectors continues to grow.
Like Intel, Micron can sell all of the memory chips it can make. And because of the shortage, it can get higher prices for them.
Currently, buyers are shying away from technology stocks. And that makes now the perfect time to buy shares of Micron.
Will they go lower from here? I don’t know.
But what I do know is that the demand for memory chips will continue to grow even when the chip shortage is over. And Micron Technology is the best company making memory chips today.
I like to nibble at companies that are way oversold. Especially in the technology sector.
And right now, you can pick up Micron shares on the cheap. If the stock drops from here, so much the better. You’ll be able to add to your position and wait for the rebound.
Good investing,
Dave
The post This Undervalued, Oversold Chipmaker Is a Steal Right Now appeared first on Profit Trends.
