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The Nasdaq-100 Technology Sector index was in fine form last year with impressive gains of 67%. This was driven by a terrific surge in tech stocks that found favor with investors once again on the back of cooling inflation, the pause in the Federal Reserve's rate hikes, and new catalysts such as artificial intelligence (AI).

A closer look at past trends indicates that the Nasdaq-100 could have another stellar year in 2024. Since its inception in 1985, the Nasdaq-100 has seen only seven down years. What's more, the index has tended to bounce back impressively in the two years following a down year. For example, it jumped 53% in 2009 and 19% in 2010 following a sharp decline of 42% in 2008.

We have already seen that the index soared impressively last year, and that followed a steep drop of 33% in 2022. While past events can't always tell us how the future may pan out, there are indications that the Nasdaq could keep surging in 2024. For instance, the Federal Reserve is expected to cut interest rates this year on account of cooling inflation.

At the same time, tech stocks can get a boost thanks to the potential growth in the smartphone and personal computer (PC) markets, as well as the surging demand for AI chips. That's why now would be a good time for investors to put their money into shares of Micron Technology (MU -1.20%), a Nasdaq stock that's trading at attractive levels now and that could go on a terrific bull run in 2024 thanks to AI.

AI is going to play a major role in helping Micron Technology return to growth in the current fiscal year, following a disappointing performance in the last one. The memory specialist's revenue fell by half in fiscal 2023 (which ended in August last year) to $15.5 billion, while it swung to a non-GAAP loss of $4.45 per share, compared to a profit of $8.35 per share in the prior year.

However, the memory market's oversupply has ended, driven mainly by the growing demand for memory chips being deployed in AI applications. For instance, Micron's peer SK Hynix estimates that the demand for high-bandwidth memory (HBM) chips, which are deployed in AI servers, could increase at an impressive annual rate of 82% through 2027. Samsung has also seen its orders for HBM double in 2023.

The good news is that Micron is all set to capitalize on the fast-growing HBM opportunity with the help of Nvidia. Micron management recently pointed out that its latest generation of HBM chips is in the final stages of qualification for Nvidia's GH200 Grace Hopper Superchip and the upcoming H200 AI graphics processing unit (GPU), which are set for launch this year.

Nvidia's H200 GPU is set to be equipped with HBM3e. The chipmaker points out that this memory chip will increase the memory bandwidth of its upcoming AI GPU by 43% to 4.8 terabytes per second, compared to the current-generation H100 processor. What's more, Nvidia is upgrading the memory capacity of the H200 to 141GB (gigabytes) from 80GB on the existing H100 processor.

Given that Nvidia is expected to boost the supply of its AI GPUs significantly this year, it's not surprising that reports suggest that it has made a large prepayment to Micron for HBM chips. Citing industry sources, Taiwan-based daily newspaper DigiTimes says that Nvidia has reportedly made an advance worth $770 million to Micron to secure HBM supply.

So, it's likely we'll see Nvidia moving the needle in a significant way for Micron this year. However, that's just one way in which AI could positively affect the company's growth. AI deployment in edge devices such as PCs and smartphones is expected to drive higher memory consumption as well.

According to market research firm Counterpoint Research, sales of generative AI-powered smartphones could hit 100 million units in 2024. The firm estimates that this market could clock annual growth of 83% through 2027, with a cumulative 1 billion generative AI-enabled smartphones expected to be sold over the next five years. Not surprisingly, Micron management expects "smartphone OEMs to start ramping AI-enabled smartphones in 2024, with an additional capacity of 4 to 8GB of DRAM per unit."

Micron expects a similar trend to unfold in the PC market. The chipmaker is anticipating manufacturers will start ramping up the production of AI-enabled PCs in the second half of 2024. Micron says that these AI-powered PCs are likely to be equipped with an "additional capacity of 4 to 8GB of DRAM per unit," while their storage capacities should increase as well.

This is another key growth opportunity for Micron, given how rapidly the market for AI-powered PCs is expected to grow.

All this tells us why Micron's revenue is expected to grow an impressive 48% in the current fiscal year to $23 billion.

MU Revenue Estimates for Current Fiscal Year data by YCharts

The company's loss is expected to shrink to just $0.39 per share in the current fiscal year, followed by a significant jump in profit in fiscal 2025 to $6.49 per share. Assuming Micron does hit Wall Street's earnings target over the next year, its stock price could jump to $181 based on the Nasdaq-100's forward earnings multiple of 28 (using the index as a proxy for tech stocks). That would be a 115% increase from current levels.

It's worth noting that Micron stock is trading at less than 13 times forward earnings. This makes it cheaper than Nvidia, which has nearly double the forward earnings multiple.

MU PE Ratio (Forward 1y) data by YCharts

Micron's price-to-sales ratio of 5.6 is also much lower than Nvidia's multiple of 26. As such, investors looking for an AI stock are getting a good deal on shares of Micron Technology right now, and they should consider grabbing this opportunity with both hands before the stock soars higher.

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History Suggests the Nasdaq Could Surge in 2024: A Magnificent Artificial Intelligence (AI) Stock to Buy Hand Over Fist ... - The Motley Fool