Two Tech Stocks to Consider for Long-Term Value in 2025

Are you on the lookout for tech stocks that are likely to increase in value by 2025? Look no further than two undervalued companies that could provide impressive long-term returns for investors.

As we enter early 2025, many tech stocks are experiencing significant gains. The surge in artificial intelligence (AI) that began two years ago continues to thrive. Meanwhile, the economy has recently shown signs of improvement, allowing fast-growing firms easier access to affordable funding. Additionally, several strong performers from last year are rebounding from their sharp declines in 2022, a year heavily impacted by inflation and the early stages of the ChatGPT movement.

However, not all tech stocks have shared in this upward trend. A select few have continually enhanced their business prospects regardless of investor behavior. This opens up exciting opportunities for value-seeking investors, particularly in the cases of Micron Technology (MU) and Roku (ROKU).

Micron Technology

Micron Technology is a key player in the memory chip market, significantly contributing to the ongoing AI phenomenon.

Devices that train and manage sophisticated AI models like ChatGPT rely on powerful processors from firms such as Nvidia (NVDA) and Advanced Micro Devices (AMD). However, that’s only part of the equation. These systems necessitate extensive amounts of high-speed RAM and long-term storage NAND memory. The AI accelerators provided by Nvidia and AMD also require large quantities of both types of memory. Furthermore, modern smartphones equipped with AI functionalities need significantly more memory than their predecessors.

The burgeoning demand for memory chips, driven primarily by the AI trend, serves as a powerful growth catalyst. For instance, the market for the new high-bandwidth memory (HBM) was valued at $16 billion last year, and it is projected to expand fourfold over the next three years, reaching $100 billion by 2030.

Micron's CEO, Sanjay Mehrotra, emphasized this potential growth during the company's recent earnings call: "This HBM growth will be transformational for Micron, and we are excited about our industry leadership in this important product category. We expect to be a leading supplier of HBM with the most robust, trusted, and industry-leading technology roadmap and execution record."

Indeed, Micron's HBM3E memory is already being included in the latest AI accelerators from Nvidia. The firm is also set to increase production of its next-generation HBM4 products, which promise 50% enhanced performance while significantly lowering power consumption compared to earlier models.

As a result, Micron appears well-positioned for significant growth in the upcoming years, especially as the tech sector benefits from a cyclical upswing. The chip industry is known for its cycles, and Micron faces fluctuating demand from various end-users annually.

Although Micron's stock saw a notable increase in 2023, it represented only a recovery from a challenging period for the semiconductor market. The inflation crisis of 2022 coincided with a global shortage of manufacturing facilities and materials, a lingering effect of the COVID-19 pandemic. While the stock was expected to maintain its positive trajectory through 2024, it ended the year roughly where it had begun.

The cyclical resurgence is anticipated to continue this year, spurred by fresh demands from the AI market alongside evolving consumer trends. Micron is forecasting a widening of its profit margins, which could reduce the stock's price-to-earnings (P/E) ratio from 30 times historical earnings to 9 times projected future earnings.

This presents an attractive investment opportunity.

Roku

Roku, known for its media-streaming technology, may not initially appear to be a cheap investment. The company has faced profitability challenges in recent years, with reported losses and only modest revenue growth in the past four quarters. This has led analysts to refrain from predicting positive earnings for 2025, with even the most optimistic forecasts indicating losses.

Examining Roku's stock over the past year reveals a decline of 11%, landing the shares at a low valuation of just 3.0 times trailing sales.

However, the situation is not as bleak as it seems.

Roku stands as a dominant player in North America’s media-streaming market, providing essential hardware and software platforms. The company's user-friendly interface is crucial for popular streaming services, enabling options such as Netflix (NFLX), Walt Disney, and Warner Bros Discovery to extend their reach beyond websites and smartphone apps into broader living room experiences. While other competitors exist, Roku's polished user experience has allowed it to secure a commanding market share.

Next, Roku aims to broaden its North American success internationally. The company has made strides in Latin America and several European markets, but it has yet to include international sales in its quarterly financial reports. Notably, Netflix achieves 56% of its quarterly revenue from international markets, underscoring the global potential for streaming services.

Adding to the mix, the inflation crisis prompted a downturn in the digital advertising sector, hampering companies' willingness to spend on marketing campaigns that can be costly despite being effective. As consumers return to normalized spending habits, Roku is well-positioned to benefit from advertisers seeking to reclaim ad space.

Like Micron, Roku is appearing significantly undervalued as we enter 2025.

Note: The author holds positions in Micron Technology, Netflix, Nvidia, Roku, and Walt Disney.

Stocks, Tech, Investing