Is the AI Hype Real? Top AI Stocks to Buy in 2026
Who thought hard drives were boring? Or that networking giants were past their prime? The AI revolution is rewriting the rules, and several “underappreciated” AI stocks are poised to deliver surprising returns in 2026.
The Trade: Identify and invest in AI stocks with strong growth potential that are currently undervalued by the market.
What Happened in the AI Stocks Market?
The AI stocks market experienced significant volatility in 2025, with some stocks seeing substantial gains followed by pullbacks Investors.com. Despite worries about an AI bubble, several companies have emerged as strong contenders for continued growth in 2026.
- Seagate Technology (STX): Over the last 12 months, Seagate has surged by 200.40%. Analysts have given the stock a “buy” rating with a target price of $295.23. As of today, STX is trading around $293.16 with a P/E ratio of 37.63 The 5 Best-Performing AI Stocks in Janua.
- Palantir Technologies (PLTR): Generating triple-digit returns in 2024 and 2025, Palantir is currently valued at $415 billion. Wedbush analyst Dan Ives predicts the stock could climb 140% in the next year or two, reaching a trillion-dollar market value [1 Artificial Intelligence (AI) Stock to ].
- Arista Networks (ANET) and Cisco (CSCO): UBS analysts recommend these as “out of consensus” picks with potential for revenue growth. Cisco is seeing AI-related orders double from $2 billion in fiscal year 2025 to over $4 billion in fiscal year 2026. These ‘underappreciated’ AI stocks could.
Why AI Stocks Matter
The rise of AI stocks reflects the increasing integration of artificial intelligence across various industries. These companies are either directly involved in AI development or heavily utilize AI to enhance their business operations. According to Haydar Haba, founder of Andra Capital, these companies are poised to benefit significantly from the growth of the AI industry The 5 Best-Performing AI Stocks in Janua.
Seagate’s Unexpected AI Play
Who thought hard drives were dead? Seagate is proving the skeptics wrong. While not a pure-play AI company, Seagate’s storage solutions are critical for handling the massive data demands of AI applications. The surge in demand for high-capacity storage, driven by AI and machine learning, has propelled Seagate’s stock. The “buy” rating from analysts indicates confidence in its continued growth trajectory. Therefore, Seagate represents an indirect way to capitalize on the AI boom.
Palantir: The AI Decisioning Leader
Palantir, specializing in AI decisioning software, has shown accelerating revenue growth for nine consecutive quarters. Dan Ives from Wedbush Securities highlights that Palantir is often involved in 70% to 80% of AI use cases, deeming it the “gold standard”. Palantir’s current valuation is $415 billion, but Ives believes it could reach a trillion-dollar market value, suggesting a 140% upside. For instance, Palantir’s AI platform is used by governments and large enterprises for data analysis and decision-making.
Arista and Cisco: Underappreciated AI Infrastructure
Arista Networks and Cisco are highlighted as “underappreciated” AI stocks by UBS analyst David Vogt. The increasing demand for AI infrastructure will drive revenue growth for both companies.
- Arista Networks: Supplying Ethernet switches and routing platforms for data centers, Arista is expected to benefit from the AI infrastructure build-out. Vogt believes that Wall Street is underestimating Arista’s revenue potential, given its strong purchase commitments and deferred product revenue.
- Cisco: Initially deemed an “AI loser,” Cisco is now seeing a resurgence with over $4 billion in AI-related orders for fiscal year 2026, doubling the $2 billion in fiscal year 2025. This growth is driven by AI infrastructure deployments and a strong refresh cycle for its campus networking solutions. Additionally, improved earnings guidance is expected.
The ETF Route: iShares AI Innovation ETFs
For investors seeking broader exposure to the AI stocks market, iShares offers two ETFs:
- iShares A.I. Innovation and Tech Active ETF (BAI): An actively managed fund focusing on global AI and technology equities across all market capitalizations.
- iShares Future AI & Tech ETF (ARTY): Providing targeted exposure to the full value chain of companies at the forefront of AI innovation, including generative AI, AI data & infrastructure, AI software, and AI services.
Risks to Consider in AI Stocks
While the AI market presents significant opportunities, investors must be aware of the associated risks:
- Valuation Concerns: Some AI stocks, like Palantir, trade at high multiples (over 100 times sales). Historically, software stocks reaching these levels have often experienced substantial corrections.
- Competition: The AI landscape is rapidly evolving and highly competitive. New entrants and technological advancements could disrupt existing market leaders.
- Regulatory Uncertainty: Government regulations regarding AI development and deployment could impact the growth and profitability of AI companies.
- AI Bubble: There are concerns about an AI bubble, similar to the dot-com bubble of the late 1990s. Overinflated valuations could lead to a market correction.
- Technological Obsolescence: The rapid pace of innovation in the AI space means that current technologies could become outdated quickly.
The Verdict: Cautiously Bullish on Select AI Stocks
The AI stocks market presents a mixed bag of opportunities and risks. While some stocks may be overvalued, others offer significant growth potential. The key is to be selective and focus on companies with strong fundamentals, clear AI use cases, and reasonable valuations.
- Seagate (STX): Bullish. The company’s role in providing essential storage solutions for AI applications makes it a compelling investment. Additionally, its recent performance and analyst ratings support a positive outlook.
- Palantir (PLTR): Neutral. Palantir’s high valuation and historical trends of similar stocks experiencing corrections warrant caution. While the company has strong growth potential, the risk-reward profile is less favorable at the current price.
- Arista Networks (ANET): Bullish. Arista’s position in the AI infrastructure market and the potential for underestimated revenue growth make it an attractive investment. Also, the company is expected to benefit from the increasing demand for data center networking solutions.
- Cisco (CSCO): Bullish. Cisco’s turnaround in AI-related orders and the expected refresh cycle for its networking solutions indicate a positive outlook. Moreover, the company’s transformation from an “AI loser” to a beneficiary of the AI boom is noteworthy.
In conclusion, investors should approach the AI stocks market with careful analysis and a long-term perspective. Focus on companies with strong fundamentals and sustainable growth potential. However, remember to diversify your portfolio and manage your risk exposure. The AI revolution is here to stay, but not all AI stocks are created equal.
For more AI investment insights, check out our AI Market Analysis Home.