The Great Rotation Is Creating a Once-in-a-Decade Buying Opportunity for This Growth Stock

The market is beginning to rotate away from the so-called artificial intelligence (AI) winners, as AI labs such as OpenAI scale back their chip spending commitments. Prices for memory chips, in particular, have been soaring in the last few months due to concerns about supply shortages, sending shares of Micron Technology up 282% in the last 12 months alone.

Now, it's 27% off its highs, perhaps indicating that the supply shortage is over. One stock that could benefit from this rotation and a reduced price for memory chips is Nintendo (OTC: NTDOY), which had seen its stock fall over fears of rising input costs. With input cost concerns easing, Nintendo looks like an ultra-cheap stock ready to produce improved earnings growth over the next few years.

Here's why you should consider rotating into Nintendo as a perfect growth stock to own over the next decade.

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Declining memory prices eliminate a bear case

Nintendo released its latest gaming hardware, the Switch 2, less than 12 months ago. It is already the fastest-selling console of all time. However, with better processing capabilities, the device uses more memory chips than the original Switch. This could create a significant cost headwind if the average memory chip price rises due to an OpenAI-induced supply shortage.

Investors put two and two together and thought that Nintendo would face major cost headwinds this year, and potentially beyond. While this was likely overstated due to Nintendo's long-term contracts with suppliers and the large inventory build on its balance sheet ahead of launch, it's now looking like a bear case that quickly came and went. Memory chip prices are already declining due to a pullback in commitments from AI players such as OpenAI.

This sets Nintendo up to keep pumping out new consoles, getting it ready for a massive growth cycle and expansion of its entertainment empire in the years ahead.

Growing users and an expanding entertainment empire

With these cost concerns behind them, Nintendo can focus on what matters: Selling more Switch consoles and games. It has sold over 17 million hardware units through the first nine months of the fiscal year that ends in March, leading to 99% revenue growth compared to the year prior.

In the years ahead, it will need to deliver high-quality games to customers to turn these hardware sales into profits. It has begun to do so already. The recent Pokémon Pokopia title is turning into a surprise hit, with 2.2 million copies sold within four days.

Over the next decade, Nintendo has plans to greatly expand its entertainment ambitions beyond just gaming. This includes a new Super Mario movie that has just come out, along with four theme parks opening soon around the globe. These will not just be profit drivers on their own, but should build more fans for the highly profitable gaming segment.

Despite all this growth potential, Nintendo's stock is still down 43% from its highs. This makes it a great stock to buy and hold for the next decade.

Brett Schafer has positions in Nintendo. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool recommends Nintendo. The Motley Fool has a disclosure policy.