Anything with the word artificial intelligence (AI) is minting money. Many analysts fear that an AI bubble is about to burst, as the returns it is generating so far do not justify the money being invested in AI infrastructure. Now, AI is not a hardware technology that yields results immediately, but closer to software and the cloud that needs capital and scalability to become profitable.
AI needs a capital-intensive infrastructure, use-case scenarios, and wide-scale adoption of AI products and services.
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The AI stock I’d most want to buy right now
Until last year, Nvidia was the most wanted AI stock. However, companies came up with AI models that could be trained on less powerful graphics processing units (GPUs), leading the way for Advanced Micro Devices GPUs and Broadcom’s accelerators. But one thing engineers can’t change is the need for storage. Large models need high-bandwidth memory (HBM) to process and store data. AI’s hunger for data will only grow as new applications come up.
Take the case of mobile phones and computers. They need more memory to store and run applications. Most hardware upgrades have more memory. Even cloud storage needs memory chips. The memory chip shortage was a common phenomenon in each of the evolutions from computers to mobile to the cloud.
However, the memory chip shortage from AI is secular as HBM is a high-margin product. Only three companies – Micron Technology (NASDAQ:MU), Samsung, and SK Hynix – can make these HBM chips. The shortage is so acute that Micron stopped manufacturing PC and mobile memory chips to focus on HBM. Samsung stopped taking long-term contracts and is selling chips at spot prices.
This windfall gain is visible as Micron Technology’s operating income jumped 150% sequentially in the fiscal second quarter of 2026. Thus, despite the stock price rising 520% in a year, it trades at a price-to-earnings (P/E) ratio of 17.3 times.
A rare AI investment opportunity
Most AI stocks have surged multiple-fold in the last two to three years, yet their valuations remain normal as the share price is backed by windfall profits. For instance, Nvidia and Celestica trade at 36 times and 41 times P/E ratios, despite their share price surging 1,160% and 3,876%, respectively, in the last five years.
While the above stocks could see some moderation, Micron Technology has just begun its AI rally. This is a rare investment opportunity to jump into the multi-year AI infrastructure rally.
Even an economic downturn or a war cannot stop AI investment. AI is now a critical infrastructure that every country needs to establish supremacy.
If Micron Technology valuations are considered, the 17 times P/E ratio means the company only has to sustain its current profits. That is possible as the company is only able to meet two-thirds of the actual demand. It will invest more than US$25 billion on building capacity in 2026 alone, all of it funded from operating cash flow. However, new capacity will take at least three years to come online, and we are only in the first year.
When new capacity comes online, the stock could surge further as it will give them more revenue and cash inflow, as it can cater to higher AI infrastructure demand.
