Two Essential AI Stocks to Watch for 2026 and the Long Term

The artificial intelligence investment cycle is just getting started. While recent headlines have centered on software and AI chatbots, the real infrastructure boom is still ahead of us. Research from Morgan Stanley suggests we’re in the early stages of a $10 trillion corporate spending wave on AI deployment and infrastructure. For investors seeking to capitalize on this trend, the semiconductor industry represents the foundation—these companies design and manufacture the chips powering every AI application, making them essential components of any AI stocks portfolio for 2026 and beyond.

The two quality chipmakers below offer compelling valuations and strong market positions heading into the new year.

Nvidia: Building the Complete AI Factory Ecosystem

Nvidia (NASDAQ: NVDA) has positioned itself as far more than just a GPU supplier. The company recognized early that training advanced AI models demands enormous computing power—often thousands of graphics processing units (GPUs) working in parallel across massive data centers. While competitors have tried to catch up, Nvidia’s intelligent management team continues several steps ahead of the competition.

The demand signal remains exceptionally strong. In the most recent quarter, Nvidia’s data center business grew 66% year-over-year, reflecting sustained customer appetite for its solutions. More importantly, the company is extending its competitive advantage by expanding beyond individual GPU sales into complete, integrated systems. Rather than selling components separately, Nvidia now bundles multiple specialized chips into comprehensive solutions.

A significant inflection point arrives with Nvidia’s Rubin platform, set to begin shipping later this year. This platform represents a substantial leap forward compared to the current Blackwell generation infrastructure. Where Blackwell operates as an integrated single platform, Rubin incorporates six distinct chip types—including Nvidia’s Vera central processing units (CPUs), Rubin GPUs, and Bluefield-4 data processing units (DPUs)—designed to deliver approximately 5 times the computational output of Blackwell while operating more efficiently.

What does this mean in practical terms? Rubin will meaningfully lower the cost of running sophisticated AI models in data centers—essentially what industry experts now call “AI factories.” Lower operating costs translate into faster development timelines and wider adoption of agentic AI systems that can autonomously execute complex task sequences for end users.

Nvidia’s management team is thinking a decade ahead, building products today for the AI infrastructure needs of 2035. The company’s financial results reflect its commanding market position: net income reached $99 billion on $187 billion in revenue over the past year. This profitability explains why Nvidia carries blue-chip status among serious investors. Trading at 24 times forward earnings estimates, the valuation remains conservative for a company with such dominant fundamentals and growth prospects.

TSMC: The Manufacturing Backbone of the AI Revolution

Taiwan Semiconductor Manufacturing Company (NYSE: TSM) deserves consideration by any investor building an AI stocks allocation. Operating for decades as the manufacturer behind Nvidia’s designs and countless other chip companies, TSMC has built an insurmountable competitive moat through accumulated expertise, proprietary manufacturing processes, and unmatched production capacity.

TSMC’s chips appear everywhere—from the data centers hosting AI models to the smartphones in consumers’ hands—but the company is benefiting disproportionately from the AI wave. Fourth quarter revenues reached $34 billion USD, representing 25% year-over-year growth. For the full year, TSMC generated $55 billion in net income on $122 billion in total revenue, margins that reflect the company’s dominant manufacturing share.

Some investors worry about cyclical demand in the semiconductor industry. Indeed, TSMC typically experiences demand weakness during economic recessions like any other business. However, the company’s trajectory tells a compelling story: over the past decade, TSMC has grown revenues at a compound annual rate of nearly 17% despite multiple economic disruptions. More significantly, company management expects AI chip demand to expand more than 50% on an annualized basis through 2029, suggesting that AI represents a structural, not cyclical, growth opportunity.

From a valuation perspective, TSMC trades even more attractively than Nvidia at just 23 times forward earnings—a discount that may undervalue the company’s position in the most transformative technology shift of the next decade. For investors targeting AI stocks with established manufacturing dominance and strong 2026 tailwinds, TSMC represents a compelling opportunity.

Why These Two AI Stocks Matter for Your 2026 Portfolio

The semiconductor industry has consistently rewarded patient, fundamental-focused investors. The research team at The Motley Fool identified these types of quality opportunities before—when Netflix was added to their recommended list in December 2004, a $1,000 investment would have grown to $431,111. Similarly, when Nvidia appeared on their list in April 2005, that same $1,000 would have appreciated to $1,105,521.

Nvidia and TSMC represent the infrastructure layer of the AI revolution. Unlike software companies that will face increasing competition, these chipmakers benefit from high barriers to entry, dominant market positions, and years of lead time before meaningful competition emerges. For 2026 and beyond, investors seeking exposure to AI stocks should consider how these manufacturers enable the entire artificial intelligence ecosystem.

Stock Advisor returns as of February 4, 2026