AI Spending Is Nearing $1 Trillion Annually. These 2 Stocks Are Most at Risk If It Slows.

Artificial intelligence (AI) capital expenditures are approaching $1 trillion annually, which is driving massive opportunities for chipmakers. But investors are growing increasingly concerned about how sustainable this spending boom really is.

Nvidia (NASDAQ: NVDA) and Micron Technology (NASDAQ: MU) have been two major beneficiaries of the AI build-out spending spree, and both once again reported record results in their most recent quarters. That said, both could face a reality check if tech giants start cutting back on their AI investments. And one has more to lose.

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Nvidia still has the most to lose if AI spending cools

The AI boom has been a big catalyst for Nvidia's surging stock price, but there's a natural catch: The company's growth is now closely tied to how much money the world's biggest tech companies are willing to pour into AI infrastructure.

Nvidia's latest results show just how strong that demand has been. In its fiscal 2027 second quarter, which ended July 26, the company reported revenue of $96.2 billion, with its data center business generating $89 billion.

Indeed, revenue from that segment more than doubled from a year earlier, reflecting the intense demand for compute power to train and run advanced AI models.

Now that the vast majority of its sales are coming from the AI build-out, if cloud providers start to delay data center projects, struggle to generate attractive returns, or decide that existing compute capacity is enough, orders for its chips could weaken. Plus, Nvidia faces intensifying competition from peer GPU makers like AMD and also from tech giants developing their own custom AI chips, while export restrictions could further limit its growth.

For investors, what matters is that AI demand continues to grow and supports AI infrastructure spending.

Nvidia could remain a dominant business even if infrastructure spending slows, but its stock could still face pressure if investors start to question how long its momentum can last.

Still, analysts are optimistic about the stock, with the vast majority of those covering the stock rating it a buy or a strong buy. The average 12-month price target implies a potential upside of roughly 51%, but at a forward price-to-earnings (P/E) ratio of roughly 24 times, investors aren't expecting the same rapid growth rates that prevailed at the start of the AI build-out.

Memory demand is strong, but a supply glut could hurt Micron

That brings us to another company with a different but equally important role in the AI build-out: Micron, which makes memory chips that are vital for keeping AI systems running optimally.

Micron has become a major beneficiary of the surge in demand for high bandwidth memory (HBM), a specialized type of memory that's heavily used in advanced AI chips. Having enough of those chips on board allows them to efficiently access and process the large volumes of data that AI workloads require.

Its latest results reflect just how far demand has outstripped supply. The company reported fiscal 2026 fourth-quarter revenue of $54.2 billion and full-year revenue of $133.2 billion -- both record figures.

Looking ahead, management expects another strong year of AI-driven demand across the business. Plus, the company reported that its HBM4 products entered high-volume shipments for its lead customer's platform.

However, memory is a cyclical business, and if history repeats itself, today's bull market will not last.

If Micron and its peers expand production aggressively in pursuit of greater market share amid this period of high prices, supply will eventually catch up with demand, resulting in memory prices falling. Too great an oversupply (perhaps as a result of overall demand slackening) would create a glut, leading to tumbling margins.

That could feed into a potential slowdown in AI spending.

Large customers could become more cautious about ordering memory, while new production capacity creates supply that's no longer needed.

On top of that, Micron has high capital expenditure needs, manufacturing risks, and faces competition from the handful of other major memory producers.

Still, nearly all Wall Street analysts covering Micron rate it a buy, with the average 12-month price target suggesting roughly 75% potential upside. But it trades at a forward P/E of just 5, which reflects investors' recognition that it operates in what has historically been a highly cyclical business that faces the risk of a meaningful downturn once this boom phase ends.

That's why even AI's biggest winners aren't without risk.

Nvidia and Micron could struggle if AI spending slows

Nvidia and Micron offer exposure to two important parts of the AI cycle, but neither is immune to a pullback in AI spending. As long as AI investment continues to expand, both companies should benefit; if spending growth cools, the market might quickly reassess their valuations.

Should AI spending slow, Nvidia looks like a better pick for investors who want a dominant business.

Rick Orford has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.