TFSA vs. RRSP: Where Should You Buy Micron Stock?

Which is the hottest stock for growth? Micron Technology (NASDAQ:MU). This stock has surged 31% year-to-date and 351% in the last 12 months. The valuations are skyrocketing, but the rally is led by an acute supply shortage. This shortage is of high-bandwidth memory chips (HBM) used in artificial intelligence (AI) data centres. And with billions of dollars being poured into AI data centres, hyperscalers are willing to pay a premium. This is making Micron a stock to buy even at its high.

The growth opportunity of Micron

Micron is the third-largest memory chipmaker and the only one in the United States. In a world where trade protectionism is growing and the AI data centre market is booming, Micron has an edge. The largest memory chipmaker, Samsung, has started selling chips at spot prices, refusing to sign long-term contracts. SK Hynix is focusing on HBM.

Micron is stopping production of mobile and computer memory chips to divert capacity to data centre memory. This saw mobile and PC makers stocking up ahead. Memory and storage capacity needs will grow as more Large Language Models (LLMs) are built. Dynamic random access memory is needed to process the data and NAND Flash to access data faster.

Unlike Nvidia’s graphics processing units (GPUs), which are meant for high-end and graphics computing, memory chips are used in almost all devices that use data. The three major memory chip makers make up almost 90% of the memory chips produced in the world. They get volume and a high price in a supply shortage.

When will the Micron growth cycle end?

The memory chip supply shortage will continue in 2026 and beyond as Micron’s fabrication facilities running at full capacity are only catering to 66% of the demand. Micron’s past growth cycles were also triggered by a supply shortage and lasted for three years.

This shortage cycle will also last for three years, as that is the time it takes to bring in new capacity. And once this shortage ends, there could be a shortage in the mobile and PC space. There is a possibility that the current growth cycle could last more than three years.

Another interesting thing about the current cycle is that the shortage is for high-margin products. The past growth cycles were for commoditized mobile and PC memory chips. This edge means the cyclical rally could be bigger than past cycles.

Where should you place this stock: TFSA or RRSP?

An effective way to invest in a growth-oriented stock like Micron is through a Tax-Free Savings Account (TFSA). A TFSA allows you to grow your money and withdraw it tax-free, even if it is US stocks. The capital gains tax will be exempt, but dividend income will face a 15% withholding tax. However, Micron’s dividend yield is negligible, 0.11%. The TFSA is ideal for such wealth-generating stocks.

Micron could see small dips due to profit booking. That is a good opportunity to buy more shares. Note that a TFSA does not allow trading. So, avoid frequent buying and selling of Micron stock. Instead, buy the stock and hold it for the next two years. In 2028, review the performance and consider selling it.

Another approach could be to buy shares of Micron and sell them when your money doubles. You can buy the shares again when the cycle ends and hold them for another cyclical rally.

Irrespective of the strategy you adopt, do not buy Micron stock in a Registered Retirement Savings Plan (RRSP). The RRSP exempts the 15% withholding tax in US dividends. The capital gain from this stock will be taxable, as RRSP withdrawals are taxable.

The post TFSA vs. RRSP: Where Should You Buy Micron Stock? appeared first on The Motley Fool Canada.

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More reading

• Take Full Advantage of Your TFSA With These Top Stocks for 2026
• The Only Stock I’d Hold in a TFSA for Life
• The TFSA Fine Print You Need to Know About U.S. Investments
• Here’s the Average TFSA Balance for 50-Year-Olds
• How to Turn Your TFSA Into a Gold Mine Starting With $7,000

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Micron Technology and Nvidia. The Motley Fool has a disclosure policy.