Few chipmakers have benefited more from the outsized enthusiasm for all things artificial intelligence (AI) than Micron Technology (MU +0.92%) and Broadcom (AVGO +0.80%).
The returns have been staggering for both. Last year, Micron was one of the best-performing stocks on the market, and it continues to churn higher in 2026. Micron stock is up 38% year to date as of Feb. 4 and 338% over the past 12 months. Over the past three-year bull market, it has had an average annualized return of 84.4%, and over the past five years, it has gained 37.7% per year.
Broadcom has slipped a bit so far this year, down about 9.7% year to date and up 43.5% over the past 12 months. But its longer-term numbers are similar to Micron's, with average annualized returns of 73.4% over the past three years and 46.3% over the past five years.
Image source: Getty Images.
Both are chipmakers and AI stocks, but they aren't really competitors. Micron makes high-bandwidth memory chips and storage solutions for data centers. Broadcom makes AI accelerator chips for networks and for hyperscalers to build their own AI systems and networks.
Both Micron and Broadcom are forever stocks as far as I'm concerned and deserve a place in a portfolio, but one stands out as the better option right now.
The edge goes to Micron
There are a couple of reasons why Micron has the slight edge over Broadcom.
One of the major reasons is Micron, as one of only three major players in the memory chip and storage space, is in a supercycle with demand outpacing supply. This is generally due to the fact that all of the AI infrastructure and data centers that were built now need memory and storage chips to unleash this massive computing power.
NASDAQ: MU
Key Data Points
On the last quarter earnings call, Micron CFO Mark Murphy said industry demand is greater than supply for its DRAM (dynamic random access memory) and NAND (flash drives) chips.
"We expect higher price, lower cost and favorable mix to all contribute to gross margin expansion in Q2," Murphy said on the call.
For 2026, Micron has agreements in place for the year's supply of HBM chips, which provides investors with more certainty about its revenue growth. And the company is forecasting approximately 40% compound annual growth for its HBM chips through 2028 to $100 billion. That's two years ahead of what was expected for that milestone.
Micron is a better value
Growth is not an issue for Broadcom either, as it is anticipating its AI revenue to double in the next quarter, year over year.
NASDAQ: AVGO
Key Data Points
But as it shifts to a higher mix of AI revenue, the gross margin is expected to drop about 100 basis points as the AI systems are more expensive. But it's still targeted for a ridiculously high 76.9% gross margin. However, it is one of the major reasons that the stock price is down year to date.
This leads us to the other reason that Micron looks better right now -- the valuation. The sell-off for Broadcom is probably not a bad thing as it resets the valuation a bit, but it's still at a ridiculously high P/E of 69, down from 95 in the fall.
Micron stock is trading at just 39 times earnings and 13 times forward earnings. Better still, its five-year PEG ratio is 0.73, indicating it is undervalued relative to its long-term earnings power.
