In the stock market, finding bargains is a common goal for every investor, whether you classify yourself as a growth investor or a value investor. Currently, the market is offering investors several bargains that deserve close attention, all of which should be at the top of every investor’s shopping list.
Microsoft is one of the biggest bargains in the stock market today. Although the stock has rebounded along with the broader market from its recent lows, it remains far from its all-time high. Moreover, its current valuation is significantly lower than historical levels. When evaluating Microsoft’s valuation, the preferred metric is the operating price-to-earnings ratio, as it removes distortions from one-time expenses and investment income. From this perspective, Microsoft stock has rarely been as cheap as it is now over the past decade.
The last time Microsoft was this cheap was in 2023, when the market widely believed the U.S. economy was headed for a recession. The current situation is far less severe, and Microsoft is exceptionally well-positioned to capitalize on the massive build-out of artificial intelligence. Through its cloud computing platform Azure, Microsoft has positioned itself as a powerful, neutral participant in the AI build-out wave. Azure provides computing power for several leading AI models, including OpenAI’s ChatGPT. Microsoft has a staggering $625 billion in backlog orders in this business segment, indicating that the company still has significant room for rapid growth and can fully leverage the dividends of the AI build-out.
Micron Technology is slightly different from most stocks. The company manufactures memory chips, which are considered part of a cyclical industry. The differences between various memory chips are minimal, making the product essentially a commodity. However, commodity prices can surge when supply decreases and demand rises, which is precisely what is happening in the memory chip sector. Micron’s management has told investors that, in the medium term, the company’s existing production capacity can only meet half to two-thirds of memory demand. Additionally, Micron expects the total addressable market for high-bandwidth memory to grow from $35 billion in 2025 to $100 billion by 2028.
Therefore, Micron currently cannot meet demand, and demand is expected to triple by 2028. This will serve as a catalyst for a surge in commodity prices, and Micron will continue to benefit as it expands its production capacity. The stock has performed exceptionally well recently, but due to the nature of its cyclical business, its forward price-to-earnings ratio is currently only 8.4 times. Given the enormous demand for memory in the coming years and the fact that Micron is currently supply-constrained, the stock remains a solid long-term bargain that will reward investors for years to come.
Summary: In summary, whether it is Microsoft, with its deep accumulation in AI infrastructure and massive backlog orders, or Micron Technology, benefiting from the supply-demand imbalance in memory chips and the explosive growth of the high-bandwidth memory market, both stocks are currently trading at relatively low valuations by historical standards, offering significant long-term investment value. Investors can pay attention to their continued performance throughout the AI and semiconductor cycles based on their own risk preferences.
