The development of artificial intelligence (AI) has been ongoing since 2023, but it is far from over.
AI hyperscalers have almost completed their record capital spending for 2025, but have already informed their investors that 2026 will be a year of even higher spending. While some investors are increasingly worried by these numbers, some of the smartest people in the world believe that we need more AI computing power, and that going against this trend is probably not a smart move for investors.
Investors need to find the companies that are primed to take advantage of these massive data center developments, and there are a handful of companies that can. One of the best holds in the last three years was Nvidia(NASDAQ: NVDA). It has given investors excellent returns and looks set to do so again in 2026.
While I can’t say for sure if Nvidia will be the best AI stock for 2026, I’m pretty confident that it will be one of the best AI stocks, and it’s also an attractive bet that it will outperform the market. These two projections combine to make Nvidia a great buy right now, and I can think of few better stocks to pick up in the final days of 2025.
Image source: Getty Images.
Nvidia makes graphics processing units (GPUs) and the technology stack that supports them. Combined, Nvidia’s technology is the most flexible and easy to use, and has some of the best performance available. That’s made it the computing powerhouse of choice since the AI race began, but investors are concerned that the company’s dominance is waning.
Titles are full of growing competition from AMD or how Broadcom signed another customer to specify a custom AI chip. There are also innovative companies such as Amazon who designed their own chip for their cloud computing platform. All these headlines make it seem like Nvidia’s grip on the market is waning, but that couldn’t be further from the truth.
In its fiscal 2026 third quarter (ended Oct. 26) earnings release, CEO Jensen Huang noted that the company was “burnt out” of cloud GPUs. Although Nvidia is ramping up production as fast as it can, it is unable to meet the current computing demands of the market. As a result, customers are beginning to look elsewhere to meet their massive computing requirements. While they might prefer Nvidia hardware, some computing power is better than none.
Furthermore, the market for these computing units is expected to be massive. In 2025, Nvidia expects global data center spending to reach $600 billion. That number is expected to quickly grow to $3 trillion to $4 trillion by 2030. There is plenty of room for more companies to thrive in that space, and given how lucrative these devices can be, it’s no surprise that there are other entrants into the IT space.
The demand for AI computing power is not slowing down, and Nvidia is well positioned to take advantage of this massive growth.
While the market remained fairly strong towards the end of the year, AI shares sold off. Nvidia recently fell about 15% from its all-time high, giving investors a solid entry price into one of the best companies to own for 2026.
Nvidia stock is trading at 23 times next year’s earnings, which is a reasonable price to pay for any company.
NVDA PE Ratio data (Before 1y) by YCharts
Once you consider that growth is expected to be rapid and persist for several years beyond 2026, that price tag looks like a steal. However, it requires one thing: AI hyperscaling NECESSITY continue to spend their resources on data centers. If they keep doing that, Nvidia stock has plenty of room to run. If they don’t, it could spell disaster for Nvidia investors.
However, all signs point to AI spending continuing to grow over the next few years, making Nvidia a fantastic stock to own for 2026.
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Keithen Drury has positions in Amazon, Broadcom and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Prediction: This Will Be the Best-Performing AI Stock of 2026 was originally published by The Motley Fool
