Key Points
July has been an odd month for artificial intelligence (AI) investors. Some stocks have done quite well, but some of the first half’s biggest winners have performed poorly. However, nothing has really changed in the AI investment landscape, and there could be huge growth still to come in this industry. That makes taking advantage when AI hardware stocks go on sale a smart thing to do, and Micron (NASDAQ: MU) and Nvidia (NASDAQ: NVDA) look like genius buys this month.
Both of these companies are at the heart of the AI build-out and look primed to head higher throughout the remainder of 2026 and into 2027.
Micron
Micron’s stock has had a banner year, and the company has also done incredibly well. Thanks to a shortage of supply in the memory chip market, prices are soaring, which boosts Micron’s earnings and profits. This tailwind is far from slackening: Wall Street expects the memory company to deliver 80% growth in its fiscal 2027 (which begins in September).
MU Revenue (Quarterly YoY Growth) data by YCharts.
However, that outlook did not prevent the stock from selling off over the past few weeks as investors grew more worried that the AI demand curve may not last as long as predicted. But to think that requires one to ignore the messaging that these companies have provided lately. Micron has informed investors that it expects the undersupply in the memory chip market to persist beyond 2027. That’s after it expects to bring some of its new production capacity online, but it still could be a while before Micron and its peers can catch up with the incredibly high demand for their wares. Furthermore, with the AI infrastructure build-out expected to keep accelerating through 2030, there’s plenty of growth ahead for this investment trend.
As a result, I think Micron is a solid stock to buy on the dip, as the medium-term tailwinds are blowing heavily in its favor.
Nvidia
Nvidia makes the GPUs that provide the bulk of AI computing power, and it uses Micron’s memory chips in its products. So, as demand for Nvidia’s processors rises, so will demand for Micron’s chips. All indications point to that demand rising, as Nvidia informed investors it expects that hyperscalers’ data center capital expenditures will rise to $1 trillion in 2027, up from $650 billion in 2026. The reality is that Nvidia likely has most of its product orders for 2027 already booked in its system, as the AI hyperscalers want to ensure the computing chips they need will be available once the rest of their data center infrastructure is complete. That gives Nvidia inside information about the future of the tech sector that it’s freely relaying to the public. Yet the market hasn’t really acted on it.
Nvidia trades at about 23.1 times forward earnings. If the company exactly hits Wall Street’s full-year estimates, it will trade at 23.1 times trailing earnings. For reference, the S&P 500 (SNPINDEX: ^GSPC) trades for 25.6 times trailing earnings right now.
NVDA PE Ratio (Forward) data by YCharts.
Based on the current share price, the market is basically saying that after 2026’s growth is complete, Nvidia should be priced as a below-average company, which is silly. Analysts are estimating strong 42% growth for it in 2027. Wall Street has historically underestimated how fast Nvidia would grow. If that’s the case now, the stock could be an even deeper value.
In the chart above, I’ve also included the forward one-year price-earnings ratio, which uses next fiscal year’s earnings estimate. From that standpoint, Nvidia trades at 16 times forward earnings, which will be a very low price to pay for the stock. I’d expect both of those numbers to increase the closer we get to 2027, making right now an excellent time to buy the stock, as the market hasn’t factored next year’s growth into its price.
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Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Micron Technology and Nvidia. The Motley Fool has a disclosure policy.
