Micron and Alphabet: 2 Undervalued AI Stocks Set to Outperform in 2026

TLDR

• UBS raised Micron’s price target to $400 from $300, citing AI-driven memory demand and supply constraints
• Micron can only meet 50% to 75% of customer demand from its largest customers
• UBS increased Micron’s 2026 EPS estimate to $45 from $41 and 2027 estimate to $60 from $42
• Alphabet trades at a forward P/E of 27.9x while leveraging AI across Search, YouTube, and Google Cloud
• Micron stock has surged 237% over the past 12 months, trading at a forward P/E of 7.1x

UBS analyst Timothy Arcuri raised the price target for Micron Technology to $400 from $300 this week while maintaining a Buy rating. The new target represents a 16% increase from Tuesday’s closing price. The firm made the decision after meetings with Micron’s management team, including the CEO and CFO.

Micron Technology, Inc., MU

Micron executives told UBS they expect the current memory cycle to last longer than previous cycles. They pointed to AI demand as the key driver behind this extended runway. The company can only meet 50% to 75% of customer demand from its largest customers due to supply constraints.

UBS raised its 2026 earnings per share estimate for Micron to $45 from $41. The firm also increased its 2027 estimate to $60 from $42. Micron stock has jumped 237% over the past 12 months, putting it ahead of nearly every other large-cap tech name in the market.

Micron’s first quarter fiscal 2026 results showed revenue up 57% year over year to $13.6 billion. Earnings per share surged 167% year over year to $4.78. Strong demand for DRAM and NAND memory from data center and AI customers drove the performance.

The company has already committed its 2026 HBM output with volume and pricing agreements in place. HBM is a type of DRAM used extensively in AI workloads. Any incremental increase in supply is not expected to fill the demand-supply gap.

Micron’s Memory Market Position

Micron expects the HBM market to grow from $35 billion in 2025 to $100 billion in 2028. The company holds a 21% share of this expanding market. Memory content per device across AI servers, AI PCs, and edge devices is growing exponentially.

AI workloads have transformed DRAM from a commodity into a strategic asset that commands premium pricing. Memory now determines the performance of AI systems across data centers, autonomous vehicles, advanced medical diagnostics, and edge applications. Micron currently trades at a forward price-to-earnings multiple of 7.1x.

Alphabet’s AI Integration Strategy

Alphabet trades at a forward P/E multiple of 27.9x while leveraging AI across its business units. The company uses AI-powered targeting and automation to improve user engagement and ad conversion efficiency for Search and YouTube.

Alphabet Inc., GOOGL

Alphabet exited the third quarter with a Google Cloud backlog of $155 billion. Over 70% of Google Cloud customers already use the company’s AI products. The company operates with over 3 billion monthly active Android devices and over 2.7 billion monthly active YouTube users globally.

Alphabet’s custom TPUs deliver higher performance and better energy efficiency in both training and inferencing workloads. This cost benefit scales as AI workloads increase across the market. The company has access to valuable first-party data through its ecosystem of devices and platforms.

According to The Motley Fool’s 2026 AI Investor Outlook Report, nine out of 10 AI investors plan to hold or buy AI stocks in the next 12 months. Both Micron and Alphabet are positioned as long-term AI investments with reasonable valuations compared to their growth prospects.

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