The S&P 500 is hovering just below its all-time high of 7,002 as of Feb. 2. Yet with the market gripped by concerns about the monetization potential of the massive investments that tech companies are making in artificial intelligence (AI), many investors are worried that the rally may be coming to an end.
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However, history shows that opening stakes in fundamentally strong businesses while they are trading at reasonable valuations is a smart long-term investment strategy. Chipmakers Micron Technology (MU 3.21%) and Taiwan Semiconductor Manufacturing (TSM 4.96%) both seem to fit the bill.
Here's why investing $1,000 in either of these stocks could make sense for you in 2026.
Micron Technology
The memory chip market has long been cyclical, but after a difficult down phase in 2023 and 2024, Micron has staged a solid comeback, with high-bandwidth memory (a type of DRAM) emerging as one of its most significant AI-driven growth catalysts. In data center servers, high-bandwidth memory is positioned close to AI chips, where it provides those processors with the data they analyze in the training and deployment of increasingly large AI models.
Micron has already locked in pricing and volume agreements for all the high-bandwidth memory it will produce in 2026, which gives the company impressive revenue visibility. However, demand for those chips is significantly higher than the available supply. The company is also preparing for the upcoming cycle, having shipped samples of its next-generation HBM4 memory products to key customers. Micron expects to be able to ramp up production of the HBM4 chips faster than it was able to do so with its HBM3E chips. It plans to start volume production in early this year and begin shipping them to customers in the second quarter.
Supplies of DRAM (dynamic random access memory) and NAND memory are also tight. With that in mind, in the current quarter, research firm TrendForce expects DRAM contract prices to soar by 55% to 60% sequentially and NAND flash prices to grow 33% to 38% sequentially. Micron is preparing to capitalize on this opportunity by rapidly expanding capacity, both organically and inorganically.
It plans to invest $24 billion in expanding its NAND wafer manufacturing facilities and another $7 billion in a new high-bandwidth memory advanced packaging facility in Singapore. It has also signed a letter of intent to purchase Powerchip Semiconductor Manufacturing's P5 fab in Taiwan for $1.8 billion in cash, which will add incremental DRAM production capacity by 2027.
Considering these tailwinds, Micron stock seems an exceptional AI-powered pick now.
Taiwan Semiconductor Manufacturing
Taiwan Semiconductor's dominance in the foundry business (contract chip manufacturing) has put it at the center of the global AI infrastructure buildout.
Advanced chips (those made using 7-nanometer process nodes and below), which are used extensively for AI workloads, high-performance computing, smartphones, and automotive systems, accounted for nearly 74% of TSMC's wafer revenues in 2025. The company is also focused on maintaining its competitive edge, and commenced mass production of 2-nanometer chips at both its Hsinchu and Kaohsiung sites in Taiwan in the fourth quarter of 2025.
Additionally, the company is now preparing to scale up production of chips made using its cutting-edge A16 process node. These power-efficient chips will be suitable for specific high-performance computing workloads with dense power delivery requirements. Management expects volume production of A16 to commence in the second half of 2026.
TSMC is also aggressively ramping its chip-on-wafer-on-substrate (CoWoS) packaging capacity, a critical technology that pairs leading-edge logic with high-bandwidth memory in AI accelerators. According to industry estimates, TSMC may boost its monthly CoWoS capacity from a range of 75,000 to 80,000 wafers in late 2025 to as high as 120,000 to 130,000 wafers by the end of 2026.
Against this backdrop, TSMC's stock could continue to grow in the coming months.
