Nvidia dominates the generative AI hardware market with a market value of $4.5 trillion, but Micron Technology (NASDAQ: MU) is quickly catching up, with shares up 317% in the last year. As AI demand grows, both companies are essential for building AI data centers and could see significant profits from tech giants’ spending on AI.

While Nvidia’s GPUs are crucial for running large language models, Micron’s memory chips are vital for storing training data and providing working memory. As tech companies ramp up spending on AI, Micron’s high-bandwidth memory chips for AI data centers could see increased demand, leading to higher prices and better margins.

In terms of financial performance, Nvidia’s revenue grew 62% year over year with a gross margin of 73.4%, while Micron saw a 57% revenue increase with a 57% gross margin. Micron’s focus on high-bandwidth memory chips for AI clients could lead to higher margins and prices amid a memory chip shortage expected to last through 2027.

Investors can expect both Nvidia and Micron to benefit from the AI hardware demand, but there are key differences between the two companies. Nvidia’s advanced chip designs and CUDA interface provide a competitive advantage, while Micron’s memory chips face commoditization and cyclical production. Micron’s $200 billion investment in new capacity may alleviate the chip shortage but could also secure long-term advantages.

Despite the differences, Micron’s lower valuation and growth potential make it an attractive buy compared to Nvidia. With a forward P/E of 12.5, Micron offers room for continued growth, while Nvidia’s forward P/E of 24 reflects higher expectations. Investors should consider Micron’s position in the AI hardware market as a long-term investment opportunity.

Before investing in Micron Technology, investors should note that it was not among the 10 best stocks identified by the Motley Fool Stock Advisor team. However, past recommendations like Netflix and Nvidia have yielded significant returns. Stock Advisor’s outperformance compared to the S&P 500 highlights the potential for high returns in the long term. Consider joining Stock Advisor for access to top stock recommendations and a community of individual investors.

Read more at Nasdaq: Is Micron Technology Stock the Next Nvidia?