Is Micron Stock the New Nvidia?

Nvidia (NASDAQ: NVDA) has become almost synonymous with the words "artificial intelligence" (AI). When people think of AI, they automatically think of this company -- and for good reason. Nvidia has generated quarter after quarter of explosive earnings growth, with revenue and profit reaching record levels, thanks to its AI products.

The company is the world's leading designer of graphics processing units (GPUs), the powerful chips used to fuel AI tasks, and has expanded across other related products, such as networking tools and enterprise software, to build complete AI systems.

Investors recognized Nvidia's strength in AI and raced to get in on this exciting growth story. The result? Nvidia stock soared more than 1,100% over the past three calendar years.

Of course, investors are always on the lookout for another stock that may perform as well. They may not have to look very far. Micron Technology (NASDAQ: MU) has proven itself to be an AI heavyweight, providing the memory and storage crucial for AI use. Is Micron stock the new Nvidia? Let's find out.

Image source: Getty Images.

Increasing earnings over time

Micron isn't new to the technology scene. The company got its start almost 50 years ago and has served computers and other devices with a portfolio of memory and storage options. This helped the company increase earnings over time, but at a much slower pace than what we're seeing today.

MU Net Income (Quarterly) data by YCharts

Though Micron has seen business ebb and flow in the past, as is normal in the cyclical semiconductor industry, the current surge is a whole new ball game. Needs linked to AI have supercharged growth, as we've seen in recent quarters. The latest is the perfect example, with revenue more than quadrupling to reach past $41 billion and net income jumping from $1.8 billion in the year-earlier period to an eye-popping $28 billion.

On top of this, Micron says that demand is surpassing supply, and the company expects this to continue beyond this calendar year. This supply situation is due to strong AI demand as well as general supply constraints that are impacting the entire memory industry. These include various factors, including the time it takes to ramp up manufacturing facilities and obtain permits, and a complex regulatory framework.

While this is a challenge for Micron, it also means that competition isn't a major problem: There is more than enough business for each of the top players to generate growth.

How Micron resembles Nvidia

Now, let's consider how Micron may resemble Nvidia. Like Nvidia, it plays a key role in the AI growth story. The company offers the DRAM, NAND, and HBM memory products that are crucial to the functioning of the technology. And we can imagine that, as the use of AI agents increases, the need for memory power may become even greater. Agentic AI, seen as the next AI growth driver, involves AI taking action, often through several steps, to solve problems.

Also like Nvidia, Micron has been around for decades, perfecting its products, and today, both companies have achieved extremely high profitability on sales. In fact, Micron's gross margin just surpassed that of Nvidia. Micron's reached more than 84% in the recent quarter, while Nvidia's gross margin tops 74%. So not only are these players benefiting from revenue growth in the AI boom, but they are translating that into significant profit.

One area that separates the two is the following: Nvidia is the AI chip leader and has expanded into related products, as mentioned above. Micron remains a memory and storage specialist -- and in AI, though Micron is growing fast and is among the leaders, South Korea's SK Hynix often is seen as the AI memory giant.

This doesn't necessarily mean Micron won't take the path of Nvidia, from an earnings and stock performance perspective. It does mean the company might come with a bit more risk, though.

Now, let's consider stock performance. Micron is already well on its way along an Nvidia-like path. The stock has soared more than 800% over the past year. So I think Micron might already be the next Nvidia -- and the demand and revenue growth Micron has seen in recent months suggest the stock still may have plenty of room to run over the long term.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and Nvidia. The Motley Fool has a disclosure policy.