It's finally 2026, and that means it's been just over three years since OpenAI's ChatGPT gave rise to the generative artificial intelligence (AI) industry. As the hype cycle gets long in the tooth, investors should pivot to more value-oriented picks like Amazon (AMZN 1.60%) and Micron Technology (MU 2.24%) that can take advantage of the new technology without being overexposed to a potential downturn.
Let's dig deeper into why both companies could make strong picks in the new year and beyond.
Amazon
It's generally not a good idea for a company to put all its eggs in one basket because it increases the chance of a negative trend having a disproportionate impact on the entire operation. This is the core risk with mainstream generative AI infrastructure stocks like Nvidia and CoreWeave, which now get the vast majority of their revenue from AI-related data center spending. Amazon doesn't have this problem.
NASDAQ: AMZN
Key Data Points
Unlike the pure-play infrastructure companies, Amazon's diversified business model gives it many different ways to create value out of the technology. Reuters reports that the company may be considering up to 30,000 layoffs this year as new technology boosts efficiency in its offices. Earlier, The New York Times cited an internal memo suggesting that AI and robotics could help Amazon avoid filling 600,000 warehouse roles it would have otherwise needed, potentially saving billions.
Amazon also gives investors exposure to the large language model (LLM) opportunity through its equity stake in Anthropic. Anthropic is quickly rising to dominate the market for enterprise-focused LLMs with its flagship model Claude, which boasts a 42% market share for coding compared to ChatGPT's 21%. Recent funding rounds place Anthropic's valuation at around $350 million. And with a 14% ownership stake in the company, Anthropic's growth will lead to noncash income for Amazon.
Micron Technology
With shares up by a whopping 247% over the last 12 months, the market is finally starting to acknowledge Micron Technology's stellar prospects in generative AI hardware. This opportunity promises to dramatically boost the company's top-line growth and margins as data centers scramble to purchase its high-bandwidth memory devices.
While the conversation about AI hardware usually focuses on graphics processing units (GPUs), memory is a critical part of the puzzle. After all, LLMs are trained on vast amounts of data, which must be stored somewhere. Secondly, inference (the process of running the model) requires powerful working memory because the LLM must quickly sift through its training data to find the correct response to user queries.
Image source: Getty Images.
Unsurprisingly, all this new demand has had a transformational impact on Micron's financial results. For the quarter ended in November, revenue surged 57% year over year to $13.64 billion, driven by AI-related demand. The company's product mix is also shifting toward high-value products, allowing its overall gross margin to jump to 56%. This number could get higher in 2026 and beyond because soaring memory demand is leading to shortages across the industry.
The tight supply for memory hardware could allow Micron to raise prices across its product lines, even for products that aren't directly related to AI. In November, Reuters reported that South Korean rival Samsung Electronics hiked prices for some of its memory products by 60% because of the shortages.
NASDAQ: MU
Key Data Points
Perhaps the most exciting thing about Micron stock is its valuation. Despite the recent rally, shares are still relatively cheap. With a forward price-to-earnings (P/E) multiple of just 10, shares trade at an eye-popping discount to the S&P 500 average estimate of 22. The stock is also much cheaper than the alternative AI hardware company Nvidia, which boasts a forward P/E of 24. Micron's low valuation means less risk and more potential for the recent rally to continue as memory demand soars.
