Investments in artificial intelligence (AI) seem to be concentrated around Nvidia More than any other individual stock. This is understandable, as the company’s AI accelerator has redefined an industry, and no competitor has yet caught up technically.
Still, investors should remember that Nvidia isn’t the only stock to make a comeback out of AI. Increasingly, the focus has shifted to another chip stock, and investors may see this name before other investors start paying attention.
Will AI create the world’s first trillionaire? Our team just published a report on a little-known company, called “Essential Dependency” that provides critical technology to both Nvidia and Intel. Continue »
Image source: Micron.
Increasingly, the larger the memory chip Micron Technology (NASDAQ: MU ) Emerging as an AI stock set for external growth.
When it comes to Micron, many brands come together to increase its stock. Micron became the leader in high bandwidth memory (HBM). HBM delivers massive amounts of data while reducing latency and power consumption. This is critical for running the most advanced AI applications.
Moreover, only three companies produce this type of memory. Based in South Korea Samsung and SK Hynix They are competitors. However, from an investor’s perspective, Micron is the only American company of the three and the only one trading in the US markets, making it the only viable option for many investors.
Additionally, HBM’s high demand helped solve a serious problem with Micron’s stock. The semiconductor industry is very cyclical, and unfortunately, the down cycle wipes out all the gains that Micron has made in the up cycle over the years.
Investors shouldn’t assume the cycle is over, and at some point, Micron will surely face another down cycle. However, thanks to HBM’s demand, the down period hasn’t hit Micron’s finances as hard, meaning the stock is in a long-term uptrend.
Over the past five years, the stock has risen nearly 350%, with most of that gain occurring in the past year.
Financial prospects have contributed to the growth of this stock price. In the first quarter of fiscal 2026 (ended Nov. 27), revenue of $13.6 billion was up 56% year over year. This has increased to over 49% annual revenue in FY 2025.
In addition, cost of goods sold and operating expenses increased at a very slow pace. Thus, fiscal first quarter net income of more than $5.2 billion is higher than the $1.9 billion earned in the prior year quarter. Although that didn’t match the 11-fold net income gain in fiscal 2025, it was still a huge growth rate.
Furthermore, analysts are projecting 109% revenue growth in fiscal 2026, and even with that growth, valuation remains muted. It’s possible that long-term investors remember the brutal declines of the past and don’t want to reward this premium price.
Still, growth forecasts don’t show a rebound in growth happening anytime soon. Thus, a price-to-earnings (P/E) ratio of 39 seems reasonable considering how fast its profits are growing. Furthermore, with a forward P/E of just 12, it looks increasingly likely that investors will keep bidding high on Micron stock.
Given Micron’s importance to AI and its value with its revenue and earnings growth, investors shouldn’t expect its stock price growth to slow anytime soon.
Admittedly, Micron has been one of the most notable victims of past collapses in the chip industry, especially when compared to chip industry peers not in the memory business. As of today, its relatively low value may reflect some concerns.
However, Micron’s HBM memory is an important part of AI development, and the fact that it is one of only three companies making this memory gives it a distinct competitive advantage.
This means that, at least for the foreseeable future, there is little chance of a wild stock selloff. Still, even with severe downside risks, the rapid growth and falling valuation make Micron arguably too cheap to ignore.
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Will Haley has no position in any of the listed stocks. The Motley Fool owns and recommends positions in Micron Technology and Nvidia. Motley Fool has a disclosure policy.
The artificial intelligence (AI) stock that refuses to slow down, and it’s not Nvidia was originally published by The Motley Fool.
