Prediction: Micron and Taiwan Semiconductor Manufacturing Stocks Will Both Rebound to Fresh Highs Before 2026 Ends

Micron Technology (NASDAQ: MU) and Taiwan Semiconductor Manufacturing (NYSE: TSM) are two of the hottest stocks in the market. They've each had strong years, with Micron rising 213% and Taiwan Semiconductor increasing 36%. While those are fantastic one-year runs, the reality is that each of them is off its high.

Taiwan Semiconductor is down around 15% while Micron is off about 25%. By the end of 2026, I think each of these stocks could etch a fresh all-time high, making them great buys today.

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Micron and Taiwan Semiconductor are important pieces of the AI build-out

When you hear about some of the computing unit makers -- like Nvidia, Advanced Micro Devices, or Broadcom -- it's easy to assume that these companies are manufacturing the products, but that's not the case. They only design the chips; then they outsource production work to various other companies.

Micron and Taiwan Semiconductor are two of these companies they outsource the work to, and each of them gets a different portion of the chip. Micron makes memory chips, which go into computing units and are also used for long-term data storage (depending on what type of memory Micron is fabricating). Taiwan Semiconductor makes logic chips, which are central to the operation of these computing units.

None of these computing units functions without logic and memory chips, making each a vital part of the AI economy. Additionally, Micron and Taiwan Semiconductor couldn't care less about where their chips are going. To them, it doesn't matter if AMD or Nvidia wins the AI computing unit race, only that they're deploying their chips in the computing devices.

Fortunately for these two, there appears to be more AI spending coming in 2027, making these two excellent stocks to buy now.

The AI arms race is just getting started

Recently, these two stocks have been down on fears that there may be too much AI spending going on and that AI hyperscalers will have to decrease their levels. While that may be what the market wants, that's not reality. The AI hyperscalers have already told investors that spending will increase in 2027.

During its latest conference call, Amazon told investors that there isn't enough compute being put up in 2026 to meet demand and that same reality will likely persist into 2027. In Q1, Alphabet told its investors that capital expenditures will be "significantly" higher in 2027 than in 2026. Lastly, Nvidia expects AI hyperscaler spending to top $1 trillion next year.

Those are all bullish signs for the chip industry, and each company is taking steps to ensure they have the capacity to meet demand as it arrives. Taiwan Semiconductor recently announced another $100 billion investment in its Arizona facilities, informing investors that there is plenty of demand for increased chip capacity. Micron is building more production facilities and plans to have more production available in mid-2027.

All of this will increase the amount of money each company can generate, which creates an explosive catalyst for the next year, when rising demand is combined with increased output. Wall Street analysts understand this and have given each company some lofty growth targets. For TSMC, they expect 42% growth for the rest of 2026 and 32% for 2027. For Micron, they expect 349% growth in its fiscal 2026's fourth quarter (ending in August) and 85% growth for fiscal 2027.

Those are solid figures, and with all AI spending pointing in the right direction, I think it's easy to say that both of these stocks will reach new all-time highs before the year is over, as AI demand is so strong and these two are primed to cash in on it.

Keithen Drury has positions in Alphabet, Amazon, Broadcom, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Broadcom, Micron Technology, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.