Key takeout
- Micron is capturing its AI fuel demand, which boosts the sale of DRAM, HBM and NAND.
- MU forecasts revenue growth of 33.9% and 62.4% for the fiscal year ending August 2026.
- IBM will enhance its AI delivery with the acquisition of Hakkoda, SAP partnership and the deployment of its Watsonx platform.
Zacks-Defined Computer-Integrated Systems Industry is currently in the top 11% of the Zacks industry ranks. Over the past year, the industry has provided a return of 18.9%, but revenue since the start of the year is 26.6%. Ranking in the top half of the Zacks ranked industry, we expect the consulting services industry to surpass the market in the next 3-6 months.
We narrowed our search to two US giants from this sector for this investment. These two companies currently have a lucrative backpack rank, with the potential for short-term price increases. The inventory is as follows: Micron Technology Inc. (mu – (Free Report) and International Business Machines Corp. (IBM – (Free report).
The chart below shows price performance for two picks a year.
Image Source: Zacks Investment Research
Micron Technology Inc.
Micron Technology has become a leader in the AI infrastructure boom due to strong demand for high-bandwidth memory (HBM) solutions. Record sales and accelerated adoption of HBMs in data center markets have led to higher revenues of MU Dynamic Access Random Memory (DRAM).
The growing adoption of artificial intelligence (AI) servers is rebuilding the DRAM market as these systems require significantly more memory than traditional servers. This has increased the demand for both large capacity DIMMs (dual inline memory modules) and low power server DRAMs. MU is leveraging this trend with its leadership in DRAM technology and its strong product roadmap, including the HBM4, which is scheduled for volume production in 2026.
Micron's diversification strategy is also fruitful. MU has created a more stable revenue base by shifting its focus from the more volatile consumer electronics market to resilient verticals such as automobiles and enterprise IT.
As AI adoption accelerates, demand for advanced memory solutions such as DRAM and NAND is rising. MU's investment in next-generation DRAM and 3D NAND ensures that it remains competitive when it delivers the performance needed for modern computing.
Micron currently has Zacks Rank #1 (strong purchase). You can see A complete list of Zacks #1 ranked stocks today is here.
Strong estimate revision
Micron's revenue and revenue growth rates were 33.9% and 62.4% for the following year (ends in August 2026), respectively. Zacks Consensus estimates of revenue for next year have improved by 6.4% over the past 30 days.
Possibility of attractive price increases
For the year, Micron provided a return of 44.6%. However, the stock broker's short-term average price target represents a 24.9% increase from its final closing price of $122. The target price for brokerages currently ranges from $75 to $200. This shows a maximum upside of 63.9% and a drawback of 38.5%.
International Business Machines Corp.
International business machines have witnessed a trend in healthy demand for hybrid cloud and AI solutions with client-centric portfolios and extensive growth. The acquisition of Hakkoda has strengthened IBM's data expertise and strengthened its clients' ability to support AI transformation initiatives.
IBM is working with SAP to tap on generative AI technology within the retail industry. This collaboration could help boost productivity and accelerate consumer-equipped products and retailer business transformation.
IBM's growth is expected to be supported by analytics, cloud computing and security over the long term. With the surge in traditional cloud-native workloads and associated applications, and the number of generated AI deployments currently being managed by businesses is a radical increase in the number of cloud workloads they currently manage.
This has resulted in a heterogeneous, dynamic and complex infrastructure strategy that has led businesses to implement a cloud-dependent, interoperable approach to highly secure multi-cloud management, transforming them into the sound demand for IBM hybrid cloud solutions.
IBM focuses more on smaller, domain-centric AI models, highlighting reliability, cost-effectiveness and practical enterprise utilities. IBM's Watsonx platform is a core technology platform for AI capabilities. It can provide the value of basic models to businesses and make them more productive.
This enterprise-ready AI and data platform consists of three products that help organizations accelerate and scale AI. It creates a new foundational model, a watsonx.ai studio for generation AI and machine learning, a watsonx.data-enabled datastore built on Open Lake House Architecture, and a watsonx.governance Toolkit. IBM currently has Zacks rank #2 (purchase).
Impressive estimate revision
International Business Machines are expected to earnings growth rates of 6.4% and 7.7% for the fiscal year respectively. Zacks Consensus estimates of revenue this year have improved by 0.3% over the past 30 days.
IBM is expected to grow revenue and revenues of 4.4% and 7.3% next year, respectively. Zacks Consensus estimates of revenue for next year have improved by 0.6% over the past 30 days.
Possibility of solid price increases
For the year, international business machines offer 11.8% returns. The stock brokerage's short-term average price target represents a 13.5% increase from the last closing price of $245.73. The brokerage's target prices currently range from $198 to $350. This shows a downside of 42.4% and 19.4%, upward.
