2 AI Stocks Positioned for Bull Run: Micron and Applied Digital

The investment case for AI infrastructure is built on a simple, powerful equation: explosive market growth meets critical supply constraints. The global AI market is projected to expand at a compound annual growth rate (CAGR) of 30.6% from 2025 to 2032, reaching a staggering $2.4 trillion. This isn't just incremental progress; it's a fundamental shift where AI is becoming a standard business utility, democratized by cloud platforms. For companies that can supply the essential building blocks, this creates a multi-year runway for scalable revenue growth.

The most acute bottleneck in this expansion is AI memory, specifically High Bandwidth Memory (HBM). As AI models grow larger and more complex, the demand for memory that can keep pace with powerful GPUs has surged beyond supply. This has triggered a global shortage and is expected to drive prices for this critical component up sharply. Micron's CEO has framed this as a durable, multi-year trend, noting that the company's initial server memory growth forecast was revised up to the "high teens" and that tightness is expected to continue into 2027. This supply-demand imbalance is the core inflection point, creating a window for manufacturers to command premium pricing and justify massive capital investment.

The scale of the opportunity is underscored by the fact that most organizations are still in the early stages of realizing AI's potential. Despite nearly universal adoption of AI tools, a recent survey found that only 39% of organizations report enterprise-level EBIT impact from AI. This gap between widespread use and material business impact signals a long runway for infrastructure scaling. Companies are still piloting and experimenting, meaning the foundational hardware-like the memory and storage chips produced by Micron-must be built and deployed at an accelerating pace to support the next wave of enterprise adoption. For a growth investor, this is the sweet spot: a market growing at over 30% annually, with a critical, undersupplied component, and the vast majority of potential customers still on the journey to scale.

Growth Profile Comparison: Micron vs. Applied Digital

When comparing these two AI infrastructure plays, the divergence in their growth profiles is stark. Micron is executing a classic scaling play, leveraging a critical supply constraint to drive explosive top-line expansion. Applied Digital, meanwhile, is building a platform from the ground up, with a revenue model that is scaling at a phenomenal rate but from a much smaller base.

Micron's growth is a direct function of AI memory demand. The company's fiscal first-quarter revenue surged 56.8% year over year to $13.64 billion, a figure that underscores the powerful tailwind from the HBM shortage. This momentum is reflected in the stock, which has risen 52% over the last month as investors bet on continued supply tightness. The company's path to dominance is capital-intensive but clear: it is investing $200 billion to expand U.S. production capacity, a multi-year build-out designed to capture a growing market. The scalability here is high, as each new fab adds gigawatt-hours of production capacity. Yet, this model is also exposed to the cycle of memory pricing, which is expected to peak in the first quarter before moderating.

Applied Digital's growth trajectory is more akin to a platform startup hitting hyper-growth. Its fiscal second-quarter revenue jumped 250% year over year to $126.6 million. This staggering rate is fueled by a unique model: building and leasing AI data center capacity. The company's scalability is tied to its construction pipeline and its ability to secure long-term, high-value contracts. Its recent operational highlights show this in action, including an approximately 15-year lease with a U.S. investment-grade hyperscaler for 200MW of AI and HPC capacity, which is expected to deliver about $5 billion in revenue. This creates a massive, recurring revenue backlog that provides visibility and fuels further expansion.

The key difference lies in market penetration and risk profile. Micron is already a dominant player in a critical component market, but its growth is maturing and its stock is near all-time highs, leaving little room for error. Applied Digital is a new entrant with a smaller addressable market today, but its growth rate and secured backlog suggest it is capturing a significant share of a rapidly expanding segment. For a growth investor, the choice hinges on the trade-off between a proven, capital-heavy scaling story and a high-risk, high-reward platform play with explosive revenue acceleration. Micron offers the security of a market leader, while Applied Digital offers the potential of a market-maker.

Scalability and Market Penetration Analysis

The long-term scalability of each company's model is defined by its ability to capture and retain market share in a multi-year growth cycle. For Micron, the path is clear but cyclical. The company is positioned to benefit from a 55% price rise for memory in the first quarter, a direct result of the AI-driven shortage. This surge in pricing power is a near-term tailwind for margins, but the scalability of this model hinges on the durability of the supply constraint. CEO Sanjay Mehrotra has framed the tightness as a durable industry fundamental expected to continue into 2027. This multi-year cycle provides a window for Micron to scale its $200 billion U.S. production build-out, but it also sets the stage for eventual supply glut and price normalization. The company's scalability is high in terms of production capacity, but its market share gains are more about capturing a larger slice of a constrained pie than expanding the pie itself.

Applied Digital, by contrast, is building the pie. Its scalability is tied to its platform model of designing, building, and leasing high-performance data centers. The company's focus is on high-performance, sustainably engineered data centers specifically optimized for AI workloads. This isn't just about raw power; it's about solving the physical and thermal challenges of next-generation compute. The company's recent operational milestones demonstrate this scalability in action. It has secured 600 MW of leased capacity from two hyperscalers, representing a staggering $16 billion in prospective lease revenue. This backlog provides a visible, recurring revenue stream that funds further construction, creating a self-reinforcing growth loop. The company's ability to secure long-term, high-value contracts with investment-grade clients signals strong market penetration and a defensible position in a critical segment.

The bottom line is a contrast in growth engines. Micron's scalability is a function of capital intensity and supply chain execution, with its market share dependent on the longevity of a price cycle. Applied Digital's scalability is a function of platform execution and secured demand, with its market share growing as it captures a larger portion of the expanding AI data center build-out. For a growth investor, Applied Digital offers a more pure-play, scalable model in a segment with fewer cyclical risks, while Micron offers a leveraged bet on the foundational component of that same build-out.

Catalysts, Risks, and What to Watch

The growth trajectories of Micron and Applied Digital are set against a backdrop of powerful, forward-looking catalysts and significant risks. For a growth investor, the next 12 to 24 months will be defined by the execution of these catalysts and the navigation of these risks.

The primary catalyst for both companies is the sustained commitment of hyperscalers to AI infrastructure. Wall Street projections suggest that AI infrastructure spending will continue to soar, driving demand for both memory and data center capacity. For Micron, this means continued tightness in the memory market, which has already triggered a 55% price rise for memory in the first quarter. The company's success hinges on the smooth ramp of its massive $200 billion U.S. production build-out, which must come online to meet this demand. For Applied Digital, the catalyst is the execution of its data center platform. The company has secured a 600 MW leased capacity backlog from two hyperscalers, representing a multi-billion dollar revenue stream. The key forward signal will be the pace at which this capacity comes online and begins generating revenue.

Yet, these catalysts are balanced by material risks. The most significant for Micron is the cyclical nature of the memory market. The current price surge and supply shortage are expected to peak, with pricing likely to moderate later in the year. If demand softens faster than supply expands, the company's premium pricing power and high-margin growth could reverse quickly. Competition is another risk; as more players enter the HBM space, pricing power could erode, compressing the very margins that are fueling the bull run. For Applied Digital, the primary risk is execution on its construction timeline. Building high-performance data centers is a complex, capital-intensive process. Delays in securing permits, construction, or commissioning could push back the recognition of its massive backlog, creating a gap between reported revenue and the market's expectations for hyper-growth.

To monitor these dynamics, investors should track a few key metrics. For Micron, watch the quarterly revenue growth rate against its $18.3 billion to $19.1 billion guidance for the next quarter, and more critically, monitor gross margin trends as pricing cycles shift. For Applied Digital, the pace of new data center capacity coming online-measured in megawatts-will be the ultimate validation of its platform scalability. The company's recent achievement of 100 MW of ready-for-service capacity is a positive early signal, but the next milestones will determine if its 250% revenue growth can be sustained. The bottom line is that both companies are riding a powerful secular trend, but their ability to convert that trend into durable, high-growth outcomes will be tested by execution and market cycles.