Why Micron and Alphabet Are the Most Undervalued AI Powerhouses in 2026

The artificial intelligence (AI) revolution is reshaping global infrastructure, creating structural demand for specialized hardware and integrated ecosystems. Two companies-Micron Technology and Alphabet-are emerging as critical players in this transformation, yet their valuations suggest they are being overlooked by the market. By analyzing their roles in AI infrastructure and monetization, it becomes clear that both are undervalued powerhouses with strong long-term growth trajectories.

Micron: The HBM King in a Scarcity-Driven Market

High Bandwidth Memory (HBM) is the unsung hero of AI infrastructure. As AI models grow in complexity, the need for memory that can handle massive data throughput becomes non-negotiable. With a 24% share of the HBM market, Micron is uniquely positioned to capitalize on this demand. According to a report, Micron's HBM supply for 2025 was fully committed, reflecting structural scarcity in the market. This scarcity is not temporary: industry analysis projects the HBM total addressable market (TAM) to expand from $35 billion in 2025 to $100 billion by 2028, with further growth to $130 billion by 2033.

Micron's strategic investments are accelerating this growth. The company is allocating $20 billion in FY 2026 to expand fabrication and packaging facilities in Singapore and the U.S., ensuring it can meet surging demand from AI data centers. This supply discipline-combined with its technological leadership in HBM-gives Micron pricing power and a durable competitive edge.

Financially, Micron appears undervalued relative to its peers. While the semiconductor industry trades at an average of 36.1x earnings and AI-focused peers at 87.3x, Micron's stock is valued at 31.1x earnings. This discount reflects skepticism about its ability to sustain growth, but the company's Q1 FY 2026 results tell a different story: record revenues of $13.64 billion, a 38.4% profit margin, and a 99.5% year-on-year revenue surge in its Cloud segment. With HBM demand expected to grow at a 40% CAGR through 2028, Micron's valuation looks increasingly attractive.

Alphabet: Building a Fully Integrated AI Flywheel

While Micron powers the hardware layer of AI, Alphabet is constructing the software and infrastructure ecosystem to monetize it. The company's AI-driven expansion in 2026 is centered on three pillars: advanced models (e.g., Gemini), in-house AI chips (TPUs), and cloud services. This integrated stack creates a flywheel effect, where improvements in one area (e.g., model performance) drive demand for others (e.g., TPU rentals).

Alphabet's revenue growth is already accelerating. Analysts project full-year revenue to reach $455 billion in 2026, up 14% from $400 billion in 2025. A key driver is its TPU rental model, which is expected to generate $13 billion annually by monetizing its custom AI chips for external clients. Meanwhile, the Gemini series of models-ranging from lightweight to super-scale-positions Alphabet to capture a broad spectrum of AI use cases, from consumer applications to enterprise workloads.

Valuation metrics further underscore Alphabet's undervaluation. Its forward P/E ratio for 2026 is estimated at 28x, lower than Microsoft's 30x. This discount is puzzling given Alphabet's long-term advantages: a dominant cloud infrastructure, a first-mover edge in AI models, and a cost structure optimized for scale. As stated by NAI500 analysts, Alphabet's integrated AI stack is "a blueprint for sustainable growth in the AI era."

The Case for Long-Term Investment

Both Micron and Alphabet are trading at attractive valuations relative to their growth potential. Micron's HBM business is a bottleneck in AI infrastructure, with supply constraints ensuring pricing power and margins. Alphabet's ecosystem, meanwhile, is building a self-reinforcing loop of innovation and monetization.

For investors, the key insight is that AI is not just a software revolution-it's a hardware and infrastructure revolution. Micron's role in enabling AI's "memory bottleneck" and Alphabet's ability to monetize AI at scale make them essential holdings for a diversified portfolio. As the TAM for HBM and AI infrastructure expands, both companies are poised to outperform in 2026 and beyond.