AI Stocks Ignore September Effect: Nvidia, Broadcom, and Micron Thrive
The September Effect is a well-known trend in the stock market where the average return for the month of September is negative. However, Nvidia (NVDA), Broadcom (AVGO), and Micron (MU) are expected to thrive despite this trend due to their involvement in the AI buildout.
Nvidia holds the largest market share in AI-accelerated computing units and has a dominant position in the industry. Broadcom is challenging Nvidia by offering custom AI chips that offer advantages over GPUs in certain scenarios. Micron makes memory chips, which are crucial for computing units from both Nvidia and Broadcom, and prices have skyrocketed due to a shortage.
The combined capacity of memory chip suppliers is not enough to meet the demand generated by the data center buildout. As a result, Micron and its peers are making a fortune from it. The AI buildout is far from over, with Nvidia expecting worldwide annual capital expenditures to total $3 trillion to $4 trillion by the end of the decade.
Nvidia trades at an attractive valuation, with a price-to-earnings ratio (PE) of 14 times next year's earnings. Broadcom is slightly more expensive at 18 times 2027's earnings, but still a solid buy. Micron's lower PE ratio of 6 times FY 2027's earnings reflects the market's skepticism about the long-term health of the memory chip market.