Nvidia (NVDA 0.68%) supplies graphics processing units (GPUs) for data centers, which are the main chips used to develop artificial intelligence (AI). The company is seeing more demand for its products than it can possibly supply, which is fueling a huge surge in its revenue and earnings.
With just one week left in 2025, Nvidia stock is sitting on a return of nearly 37%. But it has been trounced by another AI semiconductor stock, which is up by an eye-popping 229% this year: Micron Technology (MU +4.31%). This company supplies memory and storage chips that are critical for AI workloads in data centers, computers, and even smartphones.
The Wall Street Journal tracks 43 analysts who cover Micron stock, and the overwhelming majority think it's a buy heading into 2026. In fact, not a single analyst recommends selling. Here's why it could be a great addition to any portfolio for the new year.
Image source: Getty Images.
Nvidia is one of Micron's many AI customers
High-bandwidth memory (HBM) is needed to unlock the best performance from every data center GPU because it stores information in a ready state, which accelerates processing speeds. A low memory capacity can cause bottlenecks by forcing the GPU to pause its computations while it waits to receive more data, whereas a high capacity keeps data flowing constantly. This is especially important in data-intensive AI workloads.
Micron's HBM3E data center solution offers 50% more capacity than the competition, while consuming 30% less energy. This is a winning combination for AI developers that want the best performance at the lowest cost, which is why Nvidia and Advanced Micro Devices are using it in their latest GPUs.
Micron is now preparing to ramp up production of its new HBM4E solution, which could offer up to 60% more capacity with a further 20% improvement in energy efficiency. The company says that its entire supply is already sold out for the calendar year 2026. But this opportunity is only just starting to heat up. Micron CEO Sanjay Mehrotra expects the market for data center HBM to almost triple in value by 2028, reaching $100 billion annually.
While data centers are certainly Micron's biggest opportunity right now, many top manufacturers of personal computers and smartphones are integrating AI capabilities into their latest devices. This is fueling more demand for high-capacity memory in those markets, too.
During Micron's fiscal 2026 first quarter (ended Nov. 27, 2025), 59% of its customers' flagship smartphones needed at least 12 gigabytes of memory. That percentage more than doubled from the year-ago period.
NASDAQ: MU
Key Data Points
Micron's data center revenue is soaring
Micron generated a record $13.6 billion in revenue during its fiscal 2026 first quarter, which was up 56% year over year. But the real growth story was beneath the surface of the headline number, because revenue from the company's cloud memory segment (where it accounts for data center HBM sales) doubled to $5.3 billion.
Since Micron is experiencing so much demand for its chips, it had incredible pricing power during Q1, which led to improved profit margins across its entire business. As a result, the company generated earnings of $4.60 per share, which was a whopping 175% jump from the year-ago period.
Micron's momentum is still picking up steam. According to its latest guidance, the company expects to generate $18.7 billion in revenue during the current fiscal 2026 second quarter (which ends Feb. 28, 2026), representing an increase of 132% year over year. In other words, Micron's top-line growth rate is poised to more than double from Q1.
The company also anticipates a blockbuster bottom-line result in Q2, with earnings of $8.19 per share potentially in the cards. That would be a mind-blowing 480% increase year over year.
Micron stock looks cheap compared to Nvidia stock
Out of the 43 analysts tracked by The Wall Street Journal, 30 have given Micron stock a buy rating. Nine others are in the overweight (bullish) camp, while three recommend holding. Although one analyst has given the stock an underweight (bearish) rating, none recommend outright selling.
The analysts have an average price target of $308.11, suggesting that the stock could climb by 16% over the next 12 to 18 months. However, the Street-high target of $500 implies an even bigger potential return of 88%.
I think both of those targets are realistic because Micron stock looks like a bargain right now, despite tripling in value so far in 2025. Based on the company's trailing 12-month earnings of $10.52 per share, its stock is trading at a price-to-earnings (P/E) ratio of just 25.2. That means it's significantly cheaper than Nvidia stock, which trades at a P/E ratio of 44.8 as I write this.
Data by YCharts.
As I highlighted earlier, Nvidia uses Micron's data center HBM solutions in its latest GPUs, so if you expect Nvidia to continue selling truckloads of chips (which is likely), then it's only logical to be extremely bullish on Micron's business as well.
I wouldn't recommend selling Nvidia stock, because it also looks attractive right now. But Micron stock could be an even better way for investors to play the AI boom in 2026 from a value perspective.
