Two Growth Stocks for the AI Infrastructure Build-Out: TSMC and Micron

The investment thesis for semiconductor leaders like TSMC and Micron is anchored in a powerful, multi-year secular trend: the global build-out of artificial intelligence infrastructure. This is not a fleeting cycle but a foundational technology shift that is creating a massive, durable market for the chips that power it. The scale of this opportunity is becoming clear, with the entire semiconductor industry projected to grow by 25% by 2026, nearing $1 trillion in annual sales. That growth is being driven almost entirely by the demand for AI hardware.

Companies are spending billions to expand data center capacity and deploy advanced chips, making the market for these components a key secular growth vector. For investors focused on scalability and market penetration, this represents a classic "foundational technology" trend. The AI infrastructure build-out is enabling entirely new products and services, and the companies that provide the essential silicon are positioned to capture a significant share of this expanding pie.

The core of this story is the demand for advanced, power-efficient chips. As data centers scale, hyperscalers and enterprises are under intense pressure to control energy costs. This creates a direct competitive advantage for manufacturers like TSMC, which is pioneering next-generation process technologies. Its upcoming 2nm chips are expected to use between 25% to 30% less power than its current 3nm architecture at the same performance level. In a market where operational expenses are paramount, this efficiency leap is a critical differentiator that will likely drive long-term customer loyalty and pricing power.

TSMC: Capturing the Advanced Node Market

For investors betting on the AI infrastructure build-out, TSMC represents the purest play on the advanced chip market. The company has effectively cornered this high-value segment, and its technological lead is creating a widening moat. The key metric is efficiency. TSMC's upcoming 2nm chips are expected to use between 25% to 30% less power than their 3nm predecessors. In a data center environment where energy costs are a primary operational expense, this leap is a critical differentiator. Hyperscalers and enterprises building AI capacity will be forced to prioritize power efficiency, directly funneling demand toward TSMC's most advanced nodes.

This technological edge is translating into a dominant market position. As the semiconductor industry as a whole is projected to grow by 25% by 2026, nearing $1 trillion in sales, TSMC's share of that pie is set to expand. The company's market share is expected to climb from 66% to 72%, further solidifying its leadership. This isn't just about holding ground; it's about capturing a disproportionate share of a rapidly expanding market. The scalability of its foundry model, combined with its first-mover advantage in next-generation process technology, creates a virtuous cycle of investment and growth.

Financially, the setup is compelling. TSMC's profitability is robust, with an expected EPS of $10.46 in 2025, reflecting a 49% year-over-year surge. More importantly, the trajectory suggests this isn't a one-time spike. The company is forecast to maintain growth rates exceeding 20% in the following years. This combination of market leadership, technological scalability, and sustained profit expansion makes TSMC a foundational growth stock in the AI era. The company's ability to consistently deliver on its process roadmap ensures it will remain the essential partner for any company designing the next generation of AI chips.

Micron: Riding the Memory Supply-Demand Imbalance

For a growth investor, Micron's current setup is a textbook case of a supply-demand imbalance creating a powerful, albeit cyclical, tailwind. The company is forecast to see a staggering 291% increase in EPS to $32.43 for the fiscal year 2025, a figure that underscores the magnitude of the market shift. This explosive growth is being driven by a severe shortage in the memory market, where demand from AI data centers is far outstripping supply.

The evidence points to a market in tight supply. Market research anticipates a jump of 50% to 55% in the average price of DRAM this quarter, a direct consequence of the imbalance. More telling is the statement that memory chips reportedly sold out for 2026. This forward visibility on sold-out inventory signals that the current price strength is not a fleeting event but a sustained condition that will likely persist into the next year. For Micron, which has been aggressively expanding capacity, this is a golden opportunity to convert its production into premium revenue.

The sustainability of this price increase is the key question. While the current imbalance is severe, memory markets are notoriously cyclical. The massive price hikes and sold-out status are likely to trigger a wave of new investment from competitors and potentially from Micron itself in future periods. That said, the AI infrastructure build-out is creating a new, higher baseline for demand. Even as supply ramps, the sheer scale of new data center deployments may keep the market from a full collapse into oversupply for some time. Micron's path to earnings power is therefore tied to its ability to maintain its current production advantage and navigate the eventual return to a more balanced market.

The market's reaction is already pricing in this growth. Morningstar recently increased its fair value estimate on Micron by 50%, a significant signal of confidence in the near-term trajectory. This aligns with the broader thesis that semiconductor demand, particularly for AI chips, is surging. The bottom line for growth investors is that Micron is positioned to capture a disproportionate share of this expanding pie in the near term. While the cyclical nature of memory markets introduces a different kind of risk than TSMC's technological moat, the current supply-demand imbalance offers a clear, high-impact growth vector.

Why These Stocks for a 10-Year Hold?

For the growth investor, the question isn't just about next quarter's earnings, but about which companies can capture a growing slice of a massive, expanding market over the next decade. TSMC and Micron are positioned for a 10-year hold because they are not merely riding a cyclical wave, but are foundational players in a secular growth story. Their long-term dominance hinges on a combination of technological leadership, scalable manufacturing, and a direct lever on the AI infrastructure build-out's total addressable market.

TSMC's moat is built on two pillars: technological leadership and manufacturing scale. The company is the exclusive foundry for virtually all advanced AI chips, a position that creates immense switching costs for its clients. Its roadmap is the industry standard, with the upcoming 2nm chips expected to use between 25% to 30% less power than their 3nm predecessors. This isn't just incremental improvement; it's a fundamental efficiency leap that directly addresses the core operational cost for hyperscalers. As the AI infrastructure market expands, this power advantage will be a critical differentiator, locking in customers and justifying premium pricing. The scalability of its foundry model means TSMC can ramp production to meet soaring demand, capturing a growing share of the market as the total addressable market for advanced chips expands. Evidence suggests its market share is set to climb from 66% to 72%, a clear sign of its ability to dominate a foundational technology platform.

Micron, meanwhile, provides the essential memory component that is equally critical to AI data centers. The company is currently capitalizing on a severe, forward-looking supply-demand imbalance. Memory chips are reportedly sold out for 2026, a condition that has driven forecasts of a 291% increase in EPS to $32.43 for fiscal 2025. This isn't a fleeting cyclical upturn; it's a direct result of the AI build-out overwhelming existing capacity. While memory markets are cyclical, the AI infrastructure trend is creating a new, higher baseline for demand. Micron's aggressive capacity expansion positions it to convert this shortage into sustained pricing power and earnings growth for years to come, even as supply eventually catches up. The market is already recognizing this, with Morningstar increasing its fair value estimate on Micron by 50%.

The bottom line is that both companies are aligned with a secular trend, not a cyclical peak. The semiconductor industry is projected to grow by 25% by 2026, nearing $1 trillion, driven by AI. TSMC is the indispensable manufacturer for the most advanced chips, while Micron is the critical supplier for the memory that fuels them. For a growth investor, this combination of market dominance, technological scalability, and direct exposure to a durable, multi-year trend makes them compelling candidates for a decade of outperformance.

Catalysts, Risks, and What to Watch

For growth investors, the path forward hinges on a few key catalysts that will validate the current thesis and a set of risks that could derail it. The near-term setup is defined by technological milestones and market dynamics that are already in motion.

The primary catalyst for TSMC is the successful ramp of its next-generation 2nm production. The company's roadmap is the industry standard, and the 2nm chips are expected to use between 25% to 30% less power than their 3nm predecessors. This isn't just a technical achievement; it's a direct lever on the total addressable market for AI infrastructure. As hyperscalers build out data centers, their focus on operational costs will make power efficiency a non-negotiable requirement. A smooth 2nm ramp will solidify TSMC's technological leadership, lock in customer design wins, and likely justify premium pricing, directly translating into higher revenue and market share as the industry grows.

For Micron, the catalyst is the sustainability of the current memory price environment. The company is riding a severe supply-demand imbalance, with DRAM prices forecast to jump 50% to 55% this quarter and memory chips reportedly sold out for 2026. The key test will be whether this tightness persists into the next year. Investors should watch for signs that the sold-out status is being maintained and that price increases are being passed through to earnings. This would confirm that the AI build-out is creating a new, higher baseline for demand that can support Micron's aggressive capacity expansion and sustained profitability.

The most significant risk to both stocks is a cyclical downturn in the broader semiconductor cycle. While the AI infrastructure trend is secular, the memory market is notoriously cyclical. The massive price hikes and sold-out inventory are a powerful signal, but they also invite a wave of new investment from competitors and potentially from Micron itself. If supply ramps too quickly, the current tightness could reverse, leading to a price collapse and a sharp correction in earnings. This cyclical vulnerability is a key difference from TSMC's more durable technological moat.

Beyond the cycle, investors should monitor quarterly earnings for two critical signals. First, look for sustained growth in the total addressable market penetration. For TSMC, this means tracking its market share as it climbs from 66% to 72%. For Micron, it means confirming that its 291% EPS surge to $32.43 is not a one-time event but the start of a multi-year earnings ramp. Second, watch for any shifts in capital expenditure plans from major tech clients. If hyperscalers begin to slow their AI spending, it would be an early warning sign that the growth trajectory is cooling, regardless of the underlying semiconductor cycle.

The bottom line is that the growth thesis is supported by powerful, near-term catalysts. However, the path is not without friction. The cyclical nature of memory markets introduces a different kind of risk than TSMC's technological dominance. For a 10-year hold, the focus should be on whether these companies can navigate the inevitable cycles while continuing to capture a growing share of the AI infrastructure pie.