Key Takeaways
- Nvidia is launching the Vera Rubin AI platform to meet the increasing demand for compute power driven by AI advancements.
- Meta Platforms’ stock is currently undervalued compared to its peers, with potential for significant upside if it reaches a similar valuation.
- Demand for AI chips remains incredibly high, with Nvidia’s revenue increasing 22% over the previous quarter.
- Meta Platforms boasts more than 3.5 billion daily active users across its social media platforms, positioning it for profitable growth.
Introduction to AI Stocks
The AI stock market has been a sweet spot for investors in recent years, with the S&P 500 returning 18% last year. The "Magnificent Seven" tech companies, which include Nvidia and Meta Platforms, currently make up 34% of the index. This marks three consecutive years of double-digit gains, driven by the growing adoption of AI. As quoted in the article, "AI stocks have been the sweet spot for the past few years." With the increasing demand for compute power driven by AI advancements, Nvidia is well-positioned to benefit from this trend. The company’s lead in graphics processing units (GPUs) is evident in its stellar profitability, with adjusted operating profit growing 25% over the previous quarter.
Nvidia’s Growth Prospects
Nvidia’s revenue increased 22% over the previous quarter, reaching $57 billion, with sales to data centers being the predominant driver. The company’s guidance calls for fiscal fourth-quarter revenue to grow to approximately $65 billion, representing sequential growth of about 14%. As the dominant supplier of AI chips, Nvidia is expected to continue to benefit from the increasing demand for compute power. The company’s Vera Rubin AI platform, which is powered by seven chips, is expected to drive demand for advanced chips. As quoted in the article, "Nvidia sees $10 trillion of legacy computing hardware transitioning to modern compute systems." Analysts on Wall Street are forecasting the company’s earnings to increase by 57% this year, making Nvidia’s stock look like a steal, trading at just 25 times this year’s earnings forecasts.
Meta Platforms’ Undervaluation
Meta Platforms is one of the few companies that can quickly convert billions of AI investments into revenue. The company boasts more than 3.5 billion daily active users across its social media platforms, including Instagram and Facebook. As quoted in the article, "Meta spent $62 billion on capital expenditures over the last year, which is being allocated toward data centers and other technologies to support its services." Meta’s stock is currently undervalued compared to its peers, trading at just 21 times 2026 earnings estimates, a significant discount to Alphabet’s forward multiple of 29. If Meta trades at a valuation comparable to Alphabet, the stock could rise 38% in 2026, potentially outperforming the S&P 500.
Investment Opportunities
For investors looking to capitalize on the growing demand for AI, Nvidia and Meta Platforms are two top stocks that are trading at reasonable valuations. As quoted in the article, "The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them." However, with Nvidia’s strong growth prospects and Meta’s undervaluation, these stocks have the potential to outperform the S&P 500 in 2026. Investors should consider these stocks as part of a diversified portfolio, along with other top stocks recommended by the Motley Fool Stock Advisor analyst team.
Conclusion
In conclusion, the AI stock market is expected to continue to grow in 2026, driven by the increasing demand for compute power and the adoption of AI technology. Nvidia and Meta Platforms are two top stocks that are well-positioned to benefit from this trend. With Nvidia’s strong growth prospects and Meta’s undervaluation, these stocks have the potential to outperform the S&P 500 in 2026. As quoted in the article, "The Motley Fool has positions in and recommends Alphabet, Meta Platforms, Microsoft, and Nvidia." Investors should consider these stocks as part of a diversified portfolio, along with other top stocks recommended by the Motley Fool Stock Advisor analyst team.
https://www.nasdaq.com/articles/2-artificial-intelligence-ai-stocks-can-beat-market-2026