Beyond Software: Two AI Stocks to Buy That Power the AI Industry

The generative AI boom has created a curious paradox in the tech sector. While consumer-facing applications like ChatGPT and other language models are burning through billions in capital, the real money is being made by companies supplying the underlying infrastructure. According to Goldman Sachs, technology giants alone will pour over half a trillion dollars into AI-related capital spending by 2026. This is where savvy investors should focus—on the AI stocks to buy that form the backbone of this infrastructure boom.

Most of this massive spending flows to data center hardware: AI accelerator chips, high-bandwidth memory devices, and networking equipment. For investors seeking wealth-building opportunities, betting on the suppliers of this critical infrastructure—rather than the consumer software companies—offers a more direct path to significant returns.

The AI Chip Shortage: Why Infrastructure Suppliers Win

The foundation of today’s AI infrastructure boom rests on a fundamental constraint: supply cannot keep pace with demand. Memory hardware manufacturers and custom chip designers find themselves in an enviable position, as the industry’s pivot toward artificial intelligence has created acute shortages across the board.

This dynamic plays directly into the hands of foundational technology companies like Micron Technology and Broadcom, both of which have positioned themselves as essential links in the AI value chain. Their recent performance reflects this advantage. Micron’s stock has surged over 300% in the last year, driven by ravenous demand from cloud data centers hungry for advanced memory solutions. Meanwhile, Broadcom’s fourth-quarter revenue climbed 28% year-over-year to $18 billion, with AI semiconductor revenue jumping an impressive 74%.

These numbers reveal a critical insight: the most reliable profits in AI aren’t coming from building ChatGPT competitors, but from supplying the hardware those competitors need to function.

Broadcom’s Custom Chip Advantage in the AI Race

One of the most compelling investment theses emerging from the AI infrastructure buildout involves application-specific integrated circuits—custom chips designed for particular workloads. While Nvidia’s general-purpose graphics processing units (GPUs) have dominated AI conversations, they’re expensive and often include unnecessary features for specific use cases.

Broadcom has recognized this gap and moved aggressively to capture market share through partnerships and innovation. The company recently announced a landmark collaboration with OpenAI to deploy 10 gigawatts of AI accelerators specifically designed for the company’s systems. Similarly, Broadcom serves as a major supplier to Alphabet’s Google division, which has developed its own proprietary Tensor Processing Unit (TPU) to compete with Nvidia’s hardware.

The economics are compelling: custom chips allow enterprises to optimize hardware for their exact needs, reducing both acquisition and operational costs compared to off-the-shelf solutions. As pressure mounts on AI companies to achieve profitability—many are currently posting substantial losses—the demand for these cost-efficient alternatives will only accelerate.

Broadcom’s broad customer base in the AI semiconductor space, combined with its Ethernet AI switch portfolio, positions the company to capture meaningful market share as the sector matures. Trading at a forward P/E multiple of 31, the stock commands a premium valuation, but this appears justified given the company’s defensive market position and growth trajectory.

Micron Technology’s Valuation Looks Cheap for AI-Driven Growth

While Broadcom dominates the custom chip narrative, Micron Technology offers a different investment angle: exceptional value at a pivotal moment. The memory hardware specialist benefits directly from the shortage of high-bandwidth memory devices—a critical constraint in modern AI systems.

Fiscal first-quarter results illustrated this advantage vividly. Micron’s revenue jumped 57% year-over-year to $13.6 billion, predominantly driven by purchases from cloud infrastructure providers desperate to meet AI demand. The company’s memory shortages are projected to persist until at least 2027, providing a multi-year runway for elevated prices and margins.

Historically, Micron’s stock has been a difficult investment. For two decades—from the dot-com bubble through 2020—the company generated virtually no shareholder returns. This stagnation stemmed from the commoditized nature of memory hardware, where products lacked meaningful differentiation and price wars frequently erupted as capacity expanded.

Generative AI has fundamentally altered this paradigm. The speed of AI demand growth has far outpaced the industry’s ability to scale manufacturing capacity, creating a supply-constrained environment likely to persist for several years. This shift transforms Micron from a commodity play into a company with genuine pricing power.

What makes Micron particularly attractive to AI stock investors is its valuation. At a forward P/E multiple of just 12—compared to Nvidia’s 22 or Broadcom’s 31—Micron trades at a dramatic discount despite enjoying stronger near-term demand drivers. This valuation gap suggests substantial room for multiple expansion as the market recognizes the company’s role in enabling the AI infrastructure buildout.

The company has already signaled its capital allocation priorities. Rather than simply pocket windfall profits, Micron is reinvesting in its manufacturing base while returning capital to shareholders through stock buybacks, a combination that should support long-term value creation.

Why 2026 Presents a Critical Investment Window

The convergence of several factors makes the current moment particularly significant for AI hardware investors. First, the supply constraints that benefit memory and custom chip manufacturers are tightening further, not easing. Manufacturing capacity additions take years to come online, ensuring shortage conditions persist.

Second, profitability pressures on consumer-facing AI applications are mounting. As ChatGPT, Anthropic, and other generative AI platforms collectively burn tens of billions annually, enterprise customers increasingly demand cost-efficient hardware solutions. This tailwind directly benefits Broadcom’s custom chip strategy and Micron’s memory business.

Third, Goldman Sachs’ projection of over $500 billion in annual AI-related capital expenditure for 2026 provides a substantial revenue pool for infrastructure suppliers. This scale of spending virtually guarantees robust demand for both specialized processors and memory systems.

The Investment Case for AI Hardware Companies

For investors evaluating which AI stocks to buy right now, the case for infrastructure suppliers like Micron and Broadcom is compelling. The historical precedent matters here: during previous technology booms—from the dot-com era to the mobile revolution—the most durable fortunes went to platform and infrastructure providers, not application developers.

The combination of supply constraints, cost pressures on AI applications, and massive capital spending commitments from tech giants creates a favorable environment for both companies. Micron’s valuation provides the greater margin of safety, while Broadcom’s market position and growth trajectory offer exposure to the higher-end of the AI opportunity spectrum.

Investors with conviction in the AI infrastructure buildout should consider both as core holdings in this transformative cycle. The next several years will likely determine whether this opportunity lives up to its promise—and these two companies are positioned at the center of that outcome.