Artificial intelligence stocks continue to lead market trends in 2026, following their performance in previous years. Two companies are highlighted as top picks for investors looking at the AI sector.
Nvidia, known for its graphics processing units, has evolved into an end-to-end AI infrastructure provider. Its Vera Rubin platform includes six chips such as GPUs, CPUs, DPUs, and networking components. The Vera CPUs are designed for agentic AI reasoning as AI technology advances beyond generative models.
The company has combined these components into the Vera Rubin NVL72 rack, which it claims can train AI models using one-fourth the GPUs and run inference at one-tenth the cost of its Blackwell platform. These racks can form the Nvidia DGX SuperPOD, a full-stack data center platform.
Nvidia's strategy of offering turnkey solutions is capturing revenue opportunities in data centers. Before Vera Rubin's introduction, networking revenue surged 162% year over year last quarter, while GPU compute revenue climbed 56%.
Recent acquisitions have strengthened Nvidia's position. The company expanded its software edge by acquiring SchedMD, which operates the Slurm open-source platform for managing GPUs. It also licensed technology and acquired employees from Groq, a maker of AI inference chips.
Nvidia's stock trades at a forward price-to-earnings ratio of approximately 24 times next year's analyst estimates and a price/earnings-to-growth ratio below 0.7 times.
Taiwan Semiconductor Manufacturing is another company benefiting from the AI data center buildout. It manufactures Nvidia's GPUs and other advanced chips.
TSMC holds a virtual monopoly in advanced semiconductor manufacturing due to its technical expertise in producing chips at high yields and scale. This has made it a close partner to top chip designers and given it strong pricing power. Reports indicate the company has laid out a four-year price hike schedule for customers.
The company excels at pushing down chip node sizes, increasing chip density. Its newest 2-nanometer processing technology reportedly has better-than-expected yields, with demand described as through the roof despite pricing 50% higher than its 3nm technology.
TSMC's stock trades at a forward P/E of around 19.5 and a PEG below 0.65.
The Motley Fool Stock Advisor analyst team recently identified what they believe are the 10 best stocks for investors to buy now, and Nvidia was not among them. The team noted that when Nvidia made their list on April 15, 2005, a $1,000 investment would have grown to $1,139,053. Stock Advisor's total average return is 970%, compared to 197% for the S&P 500.