Micron and Nvidia Are the 2 Biggest Drivers of S&P 500 Earnings Growth. Are Their Stocks Buys?

Two chipmakers are carrying an unusual share of the market's profit growth. In its Oct. 16 Earnings Insight report, FactSet listed Micron Technology (NASDAQ:MU) and Nvidia (NASDAQ:NVDA) as the two biggest contributors to year-over-year earnings growth for the S&P 500 (SNPINDEX:^GSPC) in the third quarter of 2026.

FactSet's blended growth rate of the index, which mixes reported results with estimates for companies yet to report, is at 29%. Without Micron and Nvidia, it would drop to 20%. Said another way, two companies are providing about 9 percentage points of the growth in an index of 500.

Their stocks have been moving the other way. As of this writing, Nvidia shares are around $217 and have lost 9% since their Oct. 6 record close. Micron is near $905, about 25% below its June 25 record close of $1,213.56.

I think this gap between what these companies earn and what their shares cost makes both stocks worth buying today.

Image source: The Motley Fool.

Micron's share is already reported

Micron's part of FactSet's number is an actual result, not a forecast. The memory maker's fiscal fourth quarter of 2026, which ended Sept. 3 and was reported on Sept. 30, goes into FactSet's third-quarter total.

Micron's non-GAAP (adjusted) earnings per share came in at $33.42, a gain of over 1,000% from the $3.03 it earned in the year-ago period. Revenue grew 379% year over year to $54.2 billion.

Notably, the margin expansion behind that rise looks like it's mostly played out. Micron's GAAP operating margin (operating income as a share of revenue) hit 80.7% in fiscal Q4, versus 32.3% a year earlier. But that was just a little over the 80.4% it had in fiscal Q3, and management's guidance for the first quarter of fiscal 2027 calls for an operating margin of around 82%. So Micron's profit growth from here depends mainly on revenue instead of far higher margins. And the company expects revenue to keep rising, to about $61.5 billion in fiscal Q1.

The shares don't reflect much of that. At roughly $905, Micron trades at about 12 times the $74.33 in earnings per share it posted for fiscal 2026. This price-to-earnings ratio is under half the S&P 500's ratio of 26, based on the index's last 12 months of earnings, according to FactSet. And if Micron just matched its fiscal Q4 profit for four quarters, the stock would cost about 7 times earnings. A price this low suggests investors expect memory prices, and Micron's profits with them, to drop eventually.

Memory prices have always run in cycles, so it might happen. For now, though, Micron's own outlook points higher.

An estimate, for now

Nvidia is different. The artificial intelligence (AI) chip leader hasn't reported its fiscal third quarter yet, so FactSet still uses an estimate for it.

Still, Nvidia's outlook for the fiscal third quarter points to around $108 billion in revenue, nearly twice the $57.0 billion it posted a year before.

Nvidia's profits are growing even faster than its sales. In its fiscal 2027 second quarter, the three months ending July 26, 2026, Nvidia's non-GAAP net income jumped 118% year over year, to $54.0 billion, while revenue rose 106%. Profit also climbed 18% from the $45.5 billion Nvidia made in fiscal Q1. And the company's non-GAAP gross margin widened to 75% from 72.5% a year before, so Nvidia doesn't seem to be cutting prices to get this growth.

Investors aren't paying much of a premium for it, either. On analysts' average estimate for the fiscal year ending in January 2028, the stock sells for around 14 times earnings. For a business whose profit is more than doubling, the market seems to doubt this rate can hold.

Of course, an outlook isn't a result. A drop in data center budgets at the big cloud companies could slow Nvidia down fast.

Are both still worth buying?

The ranking also says something about where this growth comes from. FactSet said that its next three contributors, Meta Platforms, EchoStar, and Boeing, are all getting help from easy comparisons, because their year-ago results had big charges. Last quarter, Micron and Nvidia placed third and fourth behind two businesses whose profits were boosted by investment gains.

Micron and Nvidia reached the top this time by earning far more from their own operations.

Both companies are growing profits much faster than the S&P 500, and neither stock is priced like it. Memory prices could still turn, or AI spending could slow, and either would probably hit these shares hard.

But at today's prices, I'd buy both.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Boeing, Meta Platforms, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.