NVIDIA Corporation’s NVDA gains this year have been muted, up just 8.7%. NVIDIA’s latest quarterly results were strong, but that wasn’t enough to drive another large rally. Investors’ expectations are sky-high, and as a large company, NVIDIA finds it difficult to achieve extraordinary growth time and again.
No doubt, NVIDIA’s cutting-edge chips and graphics processing units are in demand, but any curb in future AI spending by hyperscale cloud providers can put pressure on its margins. At the same time, competition from peers such as Advanced Micro Devices, Inc. AMD continues to intensify.
U.S. restrictions on advanced artificial intelligence (AI) chip exports to China have already limited the company’s access to a potential market, creating pressure on revenue growth and margins. The current geopolitical tensions pose challenges for NVIDIA, as its dependency on Taiwan Semiconductor Manufacturing Company Limited TSM for advanced chip production leaves it exposed to potential supply-chain disruptions.
Amid these challenges, investors are looking beyond AI leaders like NVIDIA toward other semiconductor stocks offering greater upside. Notable among them are Micron Technology, Inc. MU and Western Digital Corporation WDC, which have gained from a rebound in memory pricing and demand. Shares of Micron and Western Digital have soared 205.5% and 182.9%, respectively, so far this year.
Let’s thus see in detail the reasons behind their strong performance this year and the key catalysts that could support further upside –
AI-Driven Memory Demand Boosts Micron’s Growth Outlook
Micron’s state-of-the-art high-bandwidth memory chips witnessed robust demand as hyperscalers ramped up spending on AI infrastructure. As a result, the company reported revenues of $41.46 billion in the fiscal third quarter of 2026, a 74% sequential increase, according to investors.micron.com. The company expects further revenue growth in the fiscal fourth quarter of 2026 to $50 billion, fueled by robust AI memory demand.
The growing demand for its high-value AI memory products and strong pricing power have helped Micron’s gross margin increase to 84.6% for the fiscal third quarter from 37.7% a year earlier. Additionally, a strong cash flow in the fiscal third quarter and strategic deals with Anthropic have enhanced Micron’s long-term demand visibility and reinforced its growth outlook.
Consequently, Micron’s expected earnings growth rate for the current year is a whopping 790.8%. The Zacks Consensus Estimate of $73.85 for MU’s earnings per share (EPS) is up 501.9% year over year.
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Brokers also remain bullish on Micron’s growth, estimating an average short-term price target for MU stock at $1,495.06, a 76.1% increase from the last closing price of $848.95. The highest target is $2,000, suggesting a potential upside of 135.6%.
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AI Storage Demand Fuels Western Digital’s Growth Outlook
For the fiscal third quarter of 2026, Western Digital’s revenues totaled $3.34 billion, up 45% from the year-ago period, according to the company’s press release. A favorable pricing environment and high demand for its high-value enterprise hard disk drives boosted revenue growth.
Furthermore, Western Digital expects revenues of about $3.65 billion, plus or minus $100 million, for the fiscal fourth quarter of 2026. The positive outlook reflects robust AI infrastructure demand, with cloud providers and businesses expanding storage capabilities to meet growing AI workloads.
Western Digital expects non-GAAP gross margin to reach 51-52% in the fiscal fourth quarter from 50.5% reported in the fiscal third quarter. The higher gross margins provide the company additional resources to fund R&D and support long-term growth initiatives.
As a result, Western Digital’s expected earnings growth rate for the current year is a solid 104.3%. The Zacks Consensus Estimate of $10.07 for WDC’s EPS is up 54.9% year over year.
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Brokers also remain optimistic about Western Digital’s growth, estimating an average short-term price target for WDC stock at $638.27, a 33.8% increase from the last closing price of $477.22. The highest target is $1,050, suggesting a potential upside of 120%.
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Both Micron and Western Digital currently have a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
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Western Digital Corporation (WDC): Free Stock Analysis Report
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Taiwan Semiconductor Manufacturing Company Ltd. (TSM): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).