Up more than 15% in the first quarter: 2 AI stocks continue to signal a "Strong Buy" for the second quarter

AI Stocks Show Strength Despite Market Weakness

While the broader market struggled in the first quarter of 2026, select artificial intelligence (AI) stocks managed to outperform. Micron Technology, Inc. (MU), known for its cutting-edge memory products that power AI applications, and Lam Research Corporation (LRCX), a vital supplier for the AI industry, saw their share prices climb by 17.9% and 24.8%, respectively, over the quarter.

As the AI sector continues to accelerate, both companies appear poised for further growth in the coming months. Below, we explore the factors that make these stocks compelling investment choices as the new quarter begins.

Micron: Positioned for Continued Growth

Micron is experiencing heightened demand for its premium memory solutions, especially those tailored for AI. Its high-bandwidth memory (HBM) chips are increasingly sought after for their ability to efficiently process large-scale data workloads. Even with ongoing supply limitations, demand for these chips remains strong as major cloud providers and data centers expand their AI capabilities.

This supply-demand gap is likely to push HBM prices higher, benefiting Micron over the long term. The company forecasts third-quarter fiscal 2026 revenues of approximately $33.5 billion, with gross margins approaching 81%, reflecting robust financial momentum.

In the second quarter of fiscal 2026, Micron reported revenues of $23.86 billion—a 196.4% increase year-over-year and a 74.9% jump from the previous quarter. This follows a 57% annual revenue increase in the first quarter, highlighting Micron’s sustained growth, strong pricing power, and leadership in the semiconductor sector.

Lam Research: Benefiting from Industry Tailwinds

Lam Research is well-placed to capitalize on the industry’s upward trajectory, particularly as companies like Micron ramp up capital expenditures. Micron’s CEO, Sanjay Mehrotra, has indicated plans to invest heavily in equipment to boost memory chip production—a move that directly benefits Lam Research, a top provider of semiconductor manufacturing equipment.

Lam Research’s expanding product lineup supports its growth outlook. Management projects revenues of about $5.7 billion for the March 2026 quarter, with expectations for strong margins and improved earnings.

The company finished 2025 on a high note, posting $5.34 billion in revenue for the December quarter and achieving a non-GAAP gross margin of 49.7%. Effective operational strategies helped drive net income to $1.59 billion, underscoring Lam Research’s solid profitability.

Why Micron and Lam Research Stand Out

Micron’s AI-centric memory products are in high demand, fueling its growth and reinforcing its dominance and pricing strength in the semiconductor industry. The company is also generating significant free cash flow—$6.9 billion in the fiscal second quarter of 2026—which can be used to fund future initiatives and reduce debt.

Lam Research is also on track for ongoing expansion, supported by robust industry demand, a growing suite of products, and strong operational performance. These factors make both Micron and Lam Research appealing investment options.

Both firms outperform their industry peers in profitability. For example, Micron’s return on equity (ROE) stands at 42.6%, far surpassing the Computer - Integrated Systems industry average of 16.5%.

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Similarly, Lam Research boasts an ROE of 62.8%, well above the Electronics - Semiconductors industry average of 34.1%.

Given these strengths, both Micron and Lam Research have earned the Zacks Rank #1 (Strong Buy) rating.

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Get More Investment Insights

Looking for more top stock recommendations from Zacks Investment Research? Download the report on the 7 Best Stocks for the Next 30 Days.

• Micron Technology, Inc. (MU): Free Stock Analysis Report
• Lam Research Corporation (LRCX): Free Stock Analysis Report

This article was first published by Zacks Investment Research.

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