The technology sector is full of innovators that offer promising long-term prospects for investors, and that's why it can be beneficial to invest in tech leaders when their share prices are down.
Shares of Advanced Micro Devices (AMD 3.41%) and Micron Technology (MU 3.82%) are trading at steep discounts, while these companies are experiencing strong demand for their data center products.
Is it time to buy these two beaten-down tech stocks?
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1. Advanced Micro Devices
Advanced Micro Devices' stock has fallen 47% from its previous peak, but the shares got a boost after the company's first-quarter earnings report in May. Despite tariffs creating a lot of uncertainty for businesses, AMD surprised investors by reporting its fourth consecutive quarter of accelerating growth, led by demand for its data center and AI chips.
While revenue and earnings fell sequentially over the fourth quarter, demand remains significantly elevated over last year. For Q1, revenue surged 36% year over year to $7.4 billion, with adjusted earnings up 55%.
NASDAQ: AMD
Key Data Points
One factor sending the stock higher after the report was AMD's positive outlook for its embedded chip business, which includes sales to industrial markets. This segment posted revenue declines over the past year, but management is now guiding for a return to growth in the second half of 2025.
Additionally, strong demand for AMD's new Radeon 9070 series graphics chips drove a revenue increase in the gaming segment of 28% year over year in the quarter. If both the embedded and gaming segments are growing later this year, AMD stock could potentially climb higher.
The stock is trading at a forward price-to-earnings (P/E) ratio of 29, which looks attractive for a company with a history of delivering strong growth. But one factor weighing on the stock price is chip export restrictions to China, which AMD expects to reduce its full-year revenue by $1.5 billion.
However, management sees the stock as undervalued based on its long-term prospects. It recently announced a $6 billion share repurchase program, bringing its total share repurchase authorization to $10 billion. CEO Lisa Su said: "Our expanded share repurchase program reflects the Board's confidence in AMD's strategic direction, growth prospects, and ability to consistently generate strong free cash flow."
With AMD on the verge of potentially seeing all its segments return to growth, in addition to pursuing a $500 billion AI chip opportunity, the stock appears to be a compelling buy.
2. Micron Technology
The soaring demand for AI chips is also creating a strong demand environment for storage and memory products to transmit massive amounts of data in data centers. Micron Technology is a leading manufacturer of these products, but uncertainty over near-term demand trends has sent the stock 37% off its recent highs.
Micron Technology operates in a highly cyclical industry. It sells memory and solid-state storage products into consumer and data center markets. The company's revenue has trended higher over the last 15 years, and it is currently sitting close to record highs from booming data center demand over the past year.
Micron is currently in a strong demand cycle. The company's revenue grew 38% year over year in the most recent quarter, and management expects record quarterly revenue in the fiscal third quarter, driven by the data center market.
NASDAQ: MU
Key Data Points
Investors should be aware that Micron carries a higher risk than AMD. While AMD's annual revenue growth has been more consistent year to year, Micron's annual revenue in the last five years looks like a roller coaster. Investors need to know if the demand from data centers can support higher revenue and earnings in the coming years.
One reason to like Micron's prospects is that data centers are going to need more memory and storage for data processing. It's absolutely essential, which is why Micron is experiencing such strong demand for high-bandwidth memory products right now.
But this is a competitive market, with several manufacturers vying for market share. This can create volatile swings in selling prices that affect Micron's revenue, hence why its revenue has been volatile in recent years.
Despite fluctuation in year-to-year financials due to these risk factors, Micron's innovation in memory technology, where new products are constantly pushing the needle on data retrieval speeds and overall performance, is driving higher demand over the long term. Micron is well-positioned to be a leader in serving booming markets like AI and cloud computing for years to come, and that should lead to higher revenue over the next 10 years, even though this growth may not happen in a smooth line.
For what it's worth, the consensus analyst estimate has revenue climbing to $45 billion over the next two years. Earnings are expected to reach $11.12. That puts the stock's forward P/E at less than 10, which could support significant upside for the stock.
