Not Nvidia. This Chip Stock Has More Upside, According to Wall Street.

Semiconductor bellwether Nvidia (NVDA +2.14%) has seen phenomenal growth over the past four years, driven mainly by its dominance in the artificial intelligence (AI) chip market.

The good news for Nvidia stock investors is that its impressive growth is here to stay. I won’t be surprised to see the company’s market cap approach the $10 trillion mark in 2030, primarily due to heavy spending on AI infrastructure. However, Wall Street believes that there is another chip stock that could deliver bigger gains than Nvidia.

SK Hynix (SKHY +3.15%) is one of the largest memory manufacturers in the world, controlling a significant chunk of the dynamic random-access memory (DRAM) and NAND flash markets. Let’s see why analysts are more bullish about SK Hynix’s growth potential compared to Nvidia and see if the memory specialist can indeed live up to expectations.

SK Hynix could surge impressively over the coming year

SK Hynix has a median 12-month price target of $250, according to 14 analysts covering the stock. That suggests potential upside of 82%. On the other hand, Nvidia’s 12-month median price target of $320 implies a 52% jump from current levels.

It is easy to see why SK Hynix stock is expected to deliver stronger gains. The AI-fueled memory demand led to a 257% year-over-year increase in SK Hynix’s Q2 revenue. What’s more, the memory supply crunch and the resulting price hikes drove a 557% year-over-year increase in the company’s net profit during the quarter.

Nvidia, for comparison, reported a 106% year-over-year increase in revenue in fiscal Q2, while non-GAAP earnings increased by 120%. So, SK Hynix is growing significantly faster than Nvidia. What’s more, the South Korean memory giant trades at a significantly cheaper valuation.

Data by YCharts

Moreover, the sunny prospects of the high-bandwidth memory (HBM) market should ensure that SK Hynix’s solid growth continues, which is why there is a healthy chance the company will easily meet Wall Street’s price target over the coming year.

HBM dominance will be a tailwind for SK Hynix

Counterpoint Research estimates that SK Hynix controls half of the fast-growing HBM market. This strong market share is one of the biggest reasons to buy SK Hynix stock. That’s because the HBM market’s revenue could hit an impressive $641 billion in 2030, according to Bloomberg Intelligence. The firm had previously anticipated $260 billion in HBM revenue by the end of the decade.

Additionally, the average HBM price is poised to more than double during this period. So, SK Hynix should benefit from a mix of strong volumes and pricing. Not surprisingly, analysts have increased their earnings per share (EPS) growth expectations for the next three years.

Data by YCharts

However, I won’t be surprised if SK Hynix’s EPS growth outpaces market expectations. The massive surge in HBM demand should ideally ensure that the memory market remains undersupplied, as manufacturing HBM requires 3x the wafer capacity of conventional DRAM, according to Bank of America. This will be beneficial for SK Hynix’s margins.

So, investors looking to buy a fast-growing company trading at an attractive valuation should consider SK Hynix, as it has the potential to live up to Wall Street’s expectations and deliver bigger gains than Nvidia over the coming year.