Both ZDC and PNG trade at elevated valuations (above 100X forward P/E), particularly compared to MU (less than 10X forward P/E), but ZDC and PNG have outperformed MU in recent years, due to stronger structural growth narratives and more predictable revenue streams. Memory chips experience an extreme pricing cycle compared to other chips, but it is beginning to see big tailwinds from the AI data center buildout. We like all three names, but each has its own risk-reward profile. ZDC can benefit from global expansion and continued onboarding of new clients, PNG benefits from growing global defense spending, and MU benefits from the AI data center buildout, but in a potential repricing where memory chip supply begins to expand, it could see earnings fall, and we think the stock would likely begin to price this in advance. Overall, we would give PNG the edge today, followed by MU and then ZDC.
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