Nvidia Stock vs. Micron Stock: Billionaires Buy One and Sell the Other

Nvidia (NASDAQ: NVDA) and Micron Technology (NASDAQ: MU) design data center infrastructure critical to artificial intelligence, which has made both stocks popular with investors. But billionaires Israel Englander and David Tepper sold Nvidia and bought Micron in the fourth quarter.

Englander and Tepper run hedge funds that beat the S&P 500 (SNPINDEX: ^GSPC) by more than 30 percentage points in the last three years, which makes them excellent sources of inspiration. But investors should think twice before swapping Nvidia for Micron.

Micron shares have added 50% while Nvidia shares have fallen 3% since the fourth quarter ended in December, and Wall Street now views Nvidia as the more attractive stock.

• Among 69 analysts, Nvidia has a median target price of $265 per share. That implies 47% upside from its current share price of $180.
• Among 49 analysts, Micron has a median target price of $450 per share. That implies 6% upside from its current share price of $426.

Here's what investors should know about Nvidia and Micron.

Image source: The Motley Fool.

Nvidia: The stock Englander and Tepper sold in the fourth quarter

Nvidia develops graphics processing units (GPUs), central processing units (CPUs), and high-performance networking equipment. While best known for inventing the GPU, a chip that accelerates complex data center workloads like artificial intelligence (AI), the company also has the largest networking business in the world.

Nvidia holds more than 80% market share in AI accelerators, and its systems consistently outperform competing infrastructure when benchmarked across training and inference tasks. But the company is truly formidable because pairs its superior hardware with a vast ecosystem of software development tools.

Morningstar analyst Brian Colello writes, "Nvidia has a wide economic moat, thanks to its market leadership in graphics processing units, hardware, software, and networking tools needed to enable the exponentially growing market around artificial intelligence." He goes on to say Nvidia is likely to maintain its dominance in AI infrastructure even as customers like Alphabet's Google develop custom chips internally.

Nvidia reported strong financial results in the fourth-quarter of fiscal 2026, which ended in January. Revenue increased 73% to $68 billion, the second consecutive acceleration, and non-GAAP earnings increased 82% to $1.62 per diluted share. Additionally, the company's guidance implies revenue will accelerate once again in the first quarter of fiscal 2027.

Nvidia trades at 38 times adjusted earnings, a very cheap valuation for a company whose adjusted earnings increased 82% in the last quarter. More importantly, the valuation still looks quite cheap when compared to forward estimates. The Wall Street consensus says Nvidia's adjusted earnings will increase at 39% annually through fiscal 2029. This stock is worth buying today.

Micron Technology: The stock Englander and Tepper bought in the fourth quarter

Micron develops memory and storage solutions for personal computers, mobile devices, data center servers, and automotive systems. The company manufactures DRAM memory products, including high-bandwidth memory (HBM), and NAND flash memory products like solid state drives (SSDs) at factories across the U.S. and Asia.

All three types of memory play an important role in AI. "HBM feeds the accelerators, DRAM stores live state and conversational memory, and NAND-based SSDs provide persistence for datasets, embeddings, retrieval indexes, logs, and checkpoints," according to Giorgio Zanella at Technotrend Market Research.

Micron is the third largest supplier of DRAM (including HBM) and NAND flash memory products, and it gained share in all three categories in the past year, while industry leader Samsung lost share. However, those share gains were primarily driven by supply constraints rather than a material competitive moat.

To elaborate, memory chips have been commoditized, meaning manufacturers primarily compete on price rather than performance or quality, according to Morningstar analyst William Kerwin. Memory chips are currently in short supply due to immense demand for AI infrastructure. Micron has turned that situation into market share gains and strong financial results.

In the first quarter, revenue climbed 56% to $13.6 billion and non-GAAP net income soared 167% to $4.78 per dilute share. While impressive, that growth was largely driven by higher prices made possible by the supply shortage. But the cyclical nature of the industry means the supply shortage will eventually become a supply glut, at which point prices may crater.

Micron trades at 38 times adjusted earnings, a seemingly cheap valuation for a company whose adjusted earnings more than doubled in the last quarter. But Wall Street expects earnings to fall sharply after fiscal 2027, such that Micron's bottom line increases at 17% annually through fiscal 2029. From that perspective, the current valuation looks expensive. Investors can buy a small position today, but Nvidia is the more attractive stock in my opinion.

Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.