Much of the growth in artificial intelligence (AI) has been driven by software and chatbots, but that doesn’t mean we haven’t seen anything yet. Morgan StanleyAccording to the latest research, it is still early innings, with corporate spending estimated to reach $10 trillion over the AI investment cycle.
Investors may do well to stick with the blue chip leaders in the semiconductor industry, as chips are the foundation of AI. Here are two quality chip stocks with compelling valuations to start 2026.
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Training AI models requires a lot of processing power, which can sometimes mean thousands of graphics processing units (GPUs) working simultaneously in data centers. Nvidia (NASDAQ: NVDA ) Not only does it make the most powerful GPUs, but it is also run by a smart management team that knows it needs to stay a few steps ahead of the competition to maintain its edge.
Demand for Nvidia’s chips remains strong, driving 66% year-over-year growth in its data center business in the current quarter. But it’s widening its competitive gap by expanding beyond GPUs.
Nvidia is offering complete computing systems that bundle multiple chips and components. Its new Rubin platform could be a game-changer when it starts shipping later this year. Compared to its current Blackwell generation all-in-one platform, Rubin will use six different chips, including Nvidia’s Vera Central Processing Units (CPUs), Rubin GPUs, and Bluefield-4 Data Processing Units (DPUs), to deliver an estimated 5x the power Blackwell produces, leading to a powerful and more efficient AI supercomputer.
With Rubin, Nvidia is providing the compute power to run tomorrow’s data centers, or AI factories. Rubin promises to significantly reduce the cost of running advanced AI models for data centers. This enables the rapid development and adoption of agentic AI, which can perform a series of tasks autonomously for the user.
Nvidia is thinking about where AI is going in 10 years and is building the products needed for that future today. Incredible demand for its products means it is effectively printing money from prices it can print, with net income rising to $99 billion on revenue of $187 billion last year. Why Nvidia’s profitability and dominant leadership in the GPU market have earned it blue-chip status for investors.
Nvidia investors should expect solid returns from here, as the stock trades at a conservative 24 times forward earnings estimates. This valuation offers potential for excellent returns in the near and long term.
