Analysts at Goldman Sachs expect big tech giants to spend more than half a trillion dollars on AI-related spending. Capital expenditure In 2026. And much of that money is going toward data center hardware such as AI accelerator chips, high-bandwidth memory devices, and various types of networking equipment.
Eye-popping levels of hardware spending contrast with low profits and often huge losses on the consumer-facing software side of the industry. This dynamic means investors can maximize returns by placing bets like pick-and-shovel providers. Micron Technology (name: mu) and Broadcom (NASDAQ: AVGO ).
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Let’s discuss why these potential millionaire makers could make great choices for February and beyond.
With shares up more than 300% in the last 12 months, Micron Technology’s bull run is already in full swing. Investors are getting more excited about the memory hardware specialist as ravenous AI continues to increase demand for its hardware. With rock-bottom valuations and memory shortages expected to continue for the next few years, the company’s long-term rally is just getting started.
While Micron’s stock is doing well now, it wasn’t always this way. In fact, stocks have been known to generate practically no growth between 2000 and the dot-com bubble in the year 2020. Share is historically weak because memory is hardware. commoditized. Micron’s products are not well differentiated from chips created by its competitors, which can lead to substantial price competition and boom-and-bust cycles as production capacity increases to meet demand.
Generative AI shakes up this old paradigm by sending demands for memory far faster than the supply can keep up. Micron is already benefiting from this trend, with fiscal first-quarter revenue up 57% year-over-year to $13.6 billion — driven primarily by purchases from cloud data centers. With the memory shortage expected to continue through 2027, Micron is poised to enjoy a near-term windfall, which it can use to reinvest in its business or return cash to shareholders. Stock buybacks.
With a forward price-to-earnings (P/E) multiple of just 12, Micron stock trades at a dramatic discount to AI hardware options. NvidiaIts forward P/E is 22. The low price tag suggests that Micron’s stock still has room for continued growth.
As noted above, the consumer-facing software side of generative AI is generally not profitable, with industry leaders like ChatGPT and Anthropic expected to burn tens of billions in 2026 alone. This dynamic can partly be blamed on high costs Nvidia Graphics processing units (GPUs) and other types of compute hardware. Broadcom’s application-specific integrated circuits (custom chips) offer an alternative.
