Micron and Nvidia Are the 2 Biggest Drivers of S&P 500 Earnings Growth. Are Their Stocks Buys?
Take out two chipmakers, and the index's third-quarter earnings growth rate falls by almost a third. So why are both stocks far below their peaks?
Two chip giants, Micron Technology and Nvidia, are the two biggest contributors to the S&P 500's earnings growth, according to a recent FactSet report. The earnings growth rate for the S&P 500 would have been 20% lower without these two companies, which make up approximately 9 percentage points of the index's growth. Currently, Nvidia shares are around $217, having lost 9% since their Oct. 6 record close, while Micron is near $905, about 25% below its June 25 record close of $1,213.56.
Micron's third-quarter earnings for fiscal 2026 were a whopping 1,000% increase, with non-GAAP earnings per share at $33.42 and revenue growing by 379% year-over-year to $54.2 billion. However, the company's operating margin is expected to remain relatively flat, with management guidance calling for around 82% in the first quarter of fiscal 2027. This suggests that Micron's profit growth in the future will likely rely more on revenue rather than higher margins, which could negatively impact the stock price.
On the other hand, Nvidia's earnings are projected to double in fiscal 2026, with non-GAAP net income reaching $54.0 billion and a non-GAAP gross margin of 75%. The company's revenue growth has also outpaced its profit growth. While investors are not paying a large premium for Nvidia's growth, with the stock trading at around 14 times earnings, the market seems skeptical that this rapid growth rate can be sustained.
Despite potential risks, such as a dip in memory prices or a slowdown in AI spending, Micron and Nvidia both appear to have significant growth potential. Therefore, they are considered worth buying at their current prices.
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