A Bull Market Is Here: 2 Brilliant Stocks Down 35% and 43% to Buy Right Now

Strong corporate earnings, the possibility of another round of tax cuts, and excitement surrounding artificial intelligence (AI) and other tech trends are helping maintain the ongoing rally in the stock market. The S&P 500 index is up nearly 26% over the last year of trading. Meanwhile, the tech-centric Nasdaq Composite index has climbed 34% across the same period. Tech giants including Nvidia, Apple, and Microsoft could keep roaring to new highs and help push major indexes to new record levels, but investors shouldn't overlook other high-quality companies that happen to be trading at big discounts at the moment.

If you're on the hunt for investments that can deliver wins in 2025 and beyond, read on to see why these Motley Fool contributors think Micron Technology (NASDAQ: MU) and ON Semiconductor (NASDAQ: ON) are smart buys right now.

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Down 35%, this AI stock is a great long-term play

Keith Noonan (Micron Technology): Micron is one of the world's leading providers of storage and memory technologies. In addition to its memory solutions for computers and other consumer devices, Micron also makes memory chips for artificial intelligence (AI) and other enterprise applications. Within the category, the company's high-bandwidth memory (HBM) offerings have emerged as a key growth driver. While the company's long-term outlook remains promising, its stock has hit some turbulence recently.

Micron actually beat expectations with the earnings report it delivered in December, posting earnings per share of $1.79 on quarterly revenue of $8.71 billion. Sales increased 84% year over year to match the average Wall Street forecast for the period, and earnings topped the average analyst estimate's call for a profit of $1.75 per share. Revenue for the AI-related data center segment rose roughly 400%. Unfortunately, the company's guidance came in well below expectations.

For the current quarter, Micron guided for earnings of $1.43 per share on sales of $7.9 billion. The average Wall Street forecast had targeted earnings per share of $1.91 on revenue of $8.98 billion. Even with a recent rally spurred by expectations that Micron's technology will be included in Nvidia's upcoming ultra-high-end GB300 processor, the company's share price is still down 35.5% from its high.

Notably, management cited some softness in consumer memory categories and inventory adjustments as the key catalysts behind its underwhelming guidance for the current quarter. These headwinds appear poised to put a damper on near-term performance, but they haven't derailed the company's growth story.

While the consumer market will continue to be important, memory solutions to support AI training and applications have become the key element in Micron's stock story. Admittedly, this category will likely see the same kinds of cyclical trends that have traditionally shaped the rest of the company's business, but there are good reasons to think that the AI memory market still has explosive growth potential.

Micron has set its sights on dominating the rapidly expanding HBM market, and it plans on launching its HBM4 memory chip in 2026 and then its HBM4E follow-up chip in 2027 or 2028. These chips are expected to be incorporated into Nvidia's next-gen Rubin 100 GPU and the successor to Advanced Micro Devices' high-end Instinct M1400 GPU.

Micron sees the annual market for HBM solutions alone climbing from $16 billion in 2024 to $100 billion in 2030. With the business still in the early stages of benefiting from the long-term boom in AI infrastructure spending, the stock looks like a smart buy right now.

A rare value in the semiconductor sector

Lee Samaha (ON Semiconductor): Onsemi (as it is more commonly known) stock trades down 19% over the last year and 43.4% from its all-time high. The reason for the decline is quite simple, and the case for buying the stock is also quite simple. In a nutshell, the semiconductor company's key end markets, automotive (notably electric vehicles) and industrial, have struggled over the last couple of years. However, history suggests that both will recover, not least within a lower interest rate environment, and Onsemi is well positioned within powerful megatrends that ensure it has excellent long-term growth prospects.

Unfortunately, the industrial manufacturing sector has been slowing down since 2022, and the relatively high interest rate environment has made car loans more expensive, precisely when a flood of EVs entered the market.

That matters to Onsemi as its power technology chips are increasingly used in electric vehicles, and its sensing technologies are used in advanced driver assistance systems (ADAS) and industrial automation.

That said, these end markets remain attractive and are attached to long-term megatrends that aren't going away anytime soon. No one disputes that EVs and ADAS are the future of the automotive industry (although there is a debate about the companies that will win it). The use of smart connected technology in the industrial world is still in its early stages.

Based on Wall Street analysts' consensus, 2024 will prove a trough year in earnings for ON Semiconductor, and 2025 will be a year of recovery. While that recovery's exact timing and magnitude are still in doubt, the stock is trading at less than 16 times expected 2024 earnings and represents an excellent value for a bottom-of-the-cycle earnings growth stock.

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Keith Noonan has positions in Micron Technology. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends ON Semiconductor. The Motley Fool has a disclosure policy.