I Sold My Archer Aviation Shares and Bought This Growth Stock Instead. The AI Supercycle Made It Obvious.
Key Points
Archer Aviation makes autonomous eVTOLs.
It is a long-term play, still far away from profitability.
Micron is trading at just 7 times forward earnings and is in the middle of a memory chip stock supercycle.
Archer Aviation (NYSE: ACHR) could very well be the future of transportation and a stock that will someday make its investors a lot of money.
That was the lure for me -- that and its cheap entry price of under $7 per share -- when I bought shares on the dip late last year. I knew at the time that this was a long-term play, that the fledgling autonomous electric vertical takeoff and landing (eVTOL) aircraft manufacturer was still in the testing phase, seeking regulatory approvals for commercial operations, and still burning cash, ramping up its technology and fleet.
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It still is, and could still very well be a great stock down the road, although the days of being a profitable company are still years away, making it a more speculative play.
But I decided to cash out and put that money toward a no-brainer play in the middle of a memory chip stock supercycle -- Micron Technology (NASDAQ: MU).
Image source: Getty Images.
Micron is trading up 275% year to date
There aren't too many better places to invest your money than Micron right now. The stock has been on a ridiculous run, up 582% over the past 12 months and more than 275% year to date. It was trading at around $340 per share at the start of the year, and now it is at roughly $1,072 per share.
The catalyst has been an insatiable demand for its high bandwidth memory chips. In the fiscal third quarter, revenue grew 74% sequentially and 346% year over year, while earnings rose 105% sequentially and 205% year over year. It raised its guidance for fourth-quarter earnings, which will be reported on Sept. 30.
Micron is already sold out of its high bandwidth memory chips for 2026 and 2027, with "tight conditions to persist beyond calendar 2027," CEO Sanjay Mehrotra said on the Q2 earnings call, due to high demand and supply constraints. It has secured $100 billion in contracted agreements through 16 long-term agreements announced last quarter that run through 2030 -- and we will likely see more announced in the coming quarters.
Micron stock is still a great value
Even after such an incredible run, Micron stock is still cheap, trading at 24 times earnings, 7 times forward earnings, and a 0.16 price-to-earnings-to-growth (PEG) ratio, which makes it a deep-value long-term hold.
That, to me, made Micron stock too hard to pass up. When you combine the insatiable demand driven by the AI build-out with the pricing power from supply constraints and the long-term contracts to fill its pipeline, Micron should be an earnings machine for years to come.
The earnings power, in fact, is so strong that the market hasn't even full recognized it yet, and for a stock that has returned 554% over the past year, that's kind of hard to believe.
So, while there may be room in your portfolio for both Archer and Micron, along with others, I decided to go make a bigger play on Micron, given its earnings power, market position, and incredible value.
Dave Kovaleski has positions in Micron Technology. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.