Buying Nvidia ahead of today’s earnings? You must see what our AI models say first

The Best AI Stocks to Buy Now

Artificial intelligence stocks maintain their allure, thanks to industry momentum and appealing valuations.

Artificial intelligence-related stocks continue to draw investors hoping the second quarter’s massive gains will continue, even as providing continued strong returns could be a challenge. “AI stocks still require even greater growth to support the very high valuations that we see in AI,” says David Sekera, Morningstar’s chief US market strategist.

In the second quarter, indexes driven by aspects of the AI trade had some of their best quarters on record. The Morningstar Global Next Generation Artificial Intelligence Index has seen considerable growth this year, up about 45% this spring and more than 33% for the year to date, owing to the AI infrastructure buildout.

The AI stocks on this list were among the index’s top constituents and earned

• Nvidia NVDA
• Microsoft MSFT
• Alphabet GOOGL
• Broadcom AVGO
• Taiwan Semiconductor Manufacturing TSM
• Meta Platforms META
• Tencent Holdings TCEHY
• Alibaba Group BABA
• Arista Networks ANET

Here’s a little more about each of the best AI stocks to buy, including commentary from the Morningstar analyst who covers the stock. All data is as of Aug. 7.

Nvidia

• Morningstar Rating: 4 Stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Very High
• Industry: Semiconductors

This latest edition of the best AI stocks to buy opens with Nvidia. Nvidia is a leading developer of graphics processing units and the software platform Cuda, used for AI model development and training. This AI stock currently looks 20% undervalued relative to our $280 fair value estimate.

Nvidia has a wide economic moat, thanks to its market leadership in graphics processing units, hardware, software, and networking tools needed to enable the exponentially growing market around artificial intelligence. In the long run, we expect tech titans to strive to find second-sources or in-house solutions to diversify away from Nvidia in AI, but these efforts will, at best, only chip away at Nvidia’s AI dominance.

Nvidia’s GPUs run parallel processing workloads, using many cores to efficiently process data at the same time. In contrast, central processing units, such as Intel’s processors for PCs and servers, or Apple’s processors for its Macs and iPhones, process the data of “0’s and 1’s” in a serial fashion. The wheelhouse of GPUs has been the gaming market, and Nvidia’s GPU graphics cards have long been considered best of breed.

More recently, parallel processing has emerged as a near-requirement to accelerate AI workloads. Nvidia took an early lead in AI GPU hardware, but more importantly, developed a proprietary software platform, Cuda, and these tools allow AI developers to build their models with Nvidia. We believe Nvidia not only has a hardware lead but also benefits from high customer switching costs around Cuda, making it unlikely for another chip designer to emerge as a leader in AI training. Nvidia’s expansion into networking has been impressive, allowing customers to cluster AI GPUs together for AI training.

We think Nvidia’s prospects will be tied to the AI market, for better or worse, for quite some time. We expect leading cloud vendors to continue to invest in in-house, while AMD is also working on GPUs and AI accelerators for the data center. However, we view Nvidia’s GPUs and Cuda as the industry leaders, and the firm’s massive valuation will hinge on the pace of AI buildouts in the years ahead.

Microsoft

• Morningstar Rating: 4 Stars
• Morningstar Rating: WideEconomic Moat
• Morningstar : MediumUncertainty Rating
• : Software—InfrastructureIndustry

Known for its Windows operating systems and Office productivity suite, Microsoft develops and licenses consumer and enterprise software. This AI stock currently looks 17% undervalued relative to our $600 fair value estimate.

Microsoft is one of three public cloud providers that can deliver a wide variety of platform-as-a-service/infrastructure-as-a-service solutions at scale. Based on its investment in OpenAI, the company has also emerged as a leader in AI. Microsoft has also enjoyed great success in upselling users on higher-priced Office 365 versions, notably to include advanced telephony features. These factors have combined to drive a more focused company that offers impressive revenue growth with high and expanding margins and deepening ties with customers. We expect solid overall growth despite the company’s size, and slightly improving margins over time to drive the stock.

With rapid growth at massive scale, Azure is clearly the centerpiece of the new Microsoft. Azure has several distinct advantages, including that it offers customers a painless way to experiment and move select workloads to the cloud, creating seamless hybrid cloud environments. Since existing customers remain in the same Microsoft environment, applications and data are easily moved from on-premises to the cloud. Microsoft can also leverage its massive installed base of all Microsoft solutions as a touch point for an Azure move. Azure also is an excellent launching point for secular trends in AI, business intelligence, and Internet of Things, as it continues to launch new services centered around these broad themes. With AI in focus, Microsoft is well positioned to become the orchestration layer for the agentic age.

Microsoft has moved beyond the on-premises focus to cloud delivery, so the pain of a model transition is a thing of the past. Office 365 retains its virtual monopoly in office productivity software, which we do not expect to change in the foreseeable future. Lastly, the company is also pushing its gaming business increasingly toward recurring revenues and residing in the cloud. We believe that customers will continue to drive the transition from on-premises to cloud solutions, and revenue growth will remain robust with margins continuing to improve for the next several years.

Alphabet

• Morningstar Rating: 4 Stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium
• Industry: Internet Content & Information

Alphabet is a holding company that wholly owns internet giant Google. The California-based company derives slightly less than 90% of its revenue from Google services, the vast majority of which is advertising sales. This AI stock is trading 18% below our fair value estimate of $433.

We view Alphabet as a conglomerate of stellar businesses. With solutions ranging from advertising to cloud computing and self-driving cars, Alphabet has built itself into a true behemoth, generating tens of billions of dollars in free cash flow annually. While antitrust concerns around Alphabet’s core search business have made headlines, we retain our confidence in Alphabet’s overall strength and foresee the firm remaining at the forefront of a variety of verticals, including search, artificial intelligence, video, and cloud computing.

Alphabet’s core strategy is to preserve its strong advertising business, with the majority of advertising revenue coming from Google Search. To that end, the firm has invested considerably over the years to improve its search capabilities, ensuring that its search engine remains deeply embedded in how hundreds of millions of users access information on the web.

We see the firm’s investments in AI as a continuation of this effort to safeguard its core product, Google Search. We believe that by leveraging generative AI, Google can not only improve its own search quality via features such as AI overviews but also improve its advertising business by augmenting its ability to target customers with relevant ads.

On the antitrust front, we don’t foresee a material deterioration in Google’s search business resulting from governmental or judicial intervention. While there is a range of possible outcomes depending on what remedial steps are imposed, we think it is likely that Google will maintain its leadership position in search and text-based advertising in the long term.

Beyond search, we have a positive outlook on Alphabet’s cloud computing platform, Google Cloud Platform. We believe increased migration of workloads to the public cloud and an uptick in the deployment and usage of AI are key growth drivers for GCP over the next five years. At the same time, we believe that as GCP scales, it will become a more important part of Alphabet’s overall business, both from a top-line and profitability perspective.

Broadcom

• Morningstar Rating: 4 Stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High
• Industry: Semiconductors

Broadcom is one of the largest semiconductor companies in the world and has also expanded into infrastructure software. Its semiconductors primarily serve computing, wired connectivity, and wireless connectivity. It has a significant position in custom AI chips to train and run inference for large language models. Shares of Broadcom currently trade at 34% below our fair value estimate of $650.

Broadcom is an amalgamation of high-value, differentiated, and moaty chip and software businesses. Put simply, Broadcom is a prolific generator of cash flow. It is a terrific aggregator of firms, big and small. Its ability to acquire and streamline generates strong profits and cash flow and fuels robust shareholder returns. We laud the company for its execution and operating efficiency, which build upon its large organic investment and help it to outperform its end markets organically.

In our view, Broadcom’s networking and custom chip businesses are its strongest and the primary drivers of the company’s wide economic moat and results. We expect it to retain a dominant position in merchant silicon for switching and routing applications, where we see it as best-of-breed for high speeds. We also expect it to hold a formidable position in custom artificial intelligence accelerators as it benefits from hyperscale cloud vendors building chips to reduce their reliance on Nvidia. We see Broadcom as the key secondary AI compute vendor to Nvidia as hyperscalers further pursue custom silicon to gain performance, save money, and avoid vendor lock-in.

Outside of chips, Broadcom’s software businesses sell virtualization software, mainframe software, and cybersecurity software, and we see its offerings as highly competitive. Broadcom’s focus on strategic large software customers like financial institutions, governments, and large enterprises—where it is deeply embedded—elicits steep switching costs. We also see upselling opportunities with VMware under the firm’s belt.

We expect Broadcom to grow rapidly as a result of its skyrocketing AI chip business. We believe AI is already the primary driver of Broadcom’s results. To us, an investment in Broadcom today is an investment in its AI chip and networking businesses. Outside of AI, we see more moderate growth led by VMware and non-AI networking. We expect acquisitions to still be on Broadcom’s radar, but perhaps with larger, less frequent deals. After the 2023 VMware purchase, we expect the company to focus on deleveraging for a couple of years before tapping the acquisition market again.

Taiwan Semiconductor Manufacturing

• Morningstar Rating: 4 Stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium
• Industry: Semiconductors

Taiwan Semiconductor Manufacturing is the world’s largest dedicated chip foundry, with about 70% market share in 2025. Its scale and high-quality technology allow the firm to generate solid operating margins, even in the highly competitive foundry business. Shares of this affordable AI stock are currently trading 21% below our fair value estimate of $534.

Taiwan Semiconductor Manufacturing Co. is the world’s largest dedicated contract chip manufacturer, or foundry, with over 70% market share as of mid-2026. It makes integrated circuits for customers based on their proprietary IC designs. TSMC has long benefited from semiconductor firms around the globe transitioning from integrated device manufacturers to fabless designers. Like all foundries, it assumes the costs and capital expenditures of running factories amid a highly cyclical market for its customers. Foundries tend to add excessive capacity during times of burgeoning demand, which can result in underutilization during downturns, which hampers profitability.

The rise of fabless semiconductor firms has supported the growth of foundries, which in turn has encouraged increased competition. However, most of these newer competitors are confined to low-end manufacturing due to prohibitive costs and engineering know-how associated with leading-edge technology. To prolong the excess returns enabled by leading-edge process technology, or nodes, TSMC initially focuses on logic products, mostly used on central processing units and mobile chips, then focuses on more cost-conscious applications. This strategy has been successful, illustrated by the fact that the firm is one of the two foundries still possessing leading-edge nodes while dozens of peers lag.

We note two long-term growth factors for TSMC. First, the consolidation of semiconductor firms is expected to create demand for integrated systems made with the most advanced nodes. Second, organic growth of artificial intelligence, Internet of Things, and high-performance computing applications may last for decades. AI and HPC play a central role in quickly processing human and machine inputs to solve complex problems like autonomous driving and language processing, which accentuates the need for more energy-efficient chips. Cheaper semiconductors have made integrating sensors, controllers, and motors to improve home, office, and factory efficiency possible.

Read more about Taiwan Semiconductor Manufacturing here.

Meta Platforms

• Morningstar Rating: 4 Stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High
• Industry: Internet Content & Information

Meta is the largest social media company in the world, boasting close to 4 billion monthly active users worldwide. Shares of Meta look 30% undervalued compared with our $850 fair value estimate.

We view Meta as the clear winner in social media. The firm’s application lineup, which includes Facebook, Instagram, WhatsApp, and Messenger, has close to 4 billion monthly active users, giving Meta unmatched scale in the sector.

The firm’s strategy is dual-pronged. On the user side, Meta has leveraged its scale and social media savvy to iteratively improve its product lineup, adding attractive features such as Stories, Reels, and even new products such as Threads. Such improvements/additions not only improve user engagement but also allow Meta to monetize these features/products by layering advertisements onto them.

On the advertising side, Meta allows advertisers of all shapes and sizes to place ads in front of engaged users. The company has benefited greatly from a general shift toward digital advertising within the broader advertising market, with social media advertising gaining substantial share, especially since the covid-19 pandemic. To bolster its advertising business, Meta has invested heavily to improve its ad-targeting algorithms, allowing it to improve its advertisers’ return on ad spending and increasing its average revenue per user over time.

While the firm’s core business remains advertising, Meta has shown a proclivity to expand beyond its ad-based revenue model by investing heavily in hardware, via Reality Labs, and AI, by investing in its own Llama large language model. While the firm’s investments in Reality Labs have been demonstrably unprofitable, we are more optimistic about Meta’s investments in AI. We believe Meta’s AI investments, especially those aimed at improving the firm’s ad-targeting algorithms, are value-accretive.

Beyond ad-targeting, Meta is also investing in consumer-facing AI, via its Llama chatbot, which is accessible to users across its applications. While a monetization strategy for this chatbot remains elusive in the near term, we believe the firm could drive increased user engagement/time spent by allowing its users access to a chatbot assistant within Meta’s applications.

Tencent

• Morningstar Rating: 5 Stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High
• Industry: Internet Content & Information

Among our affordable AI stocks, Tencent looks 39% undervalued compared with our $102 fair value estimate. Tencent holds a prominent position in China’s internet sector, with a diverse portfolio of products and services used daily by a significant portion of the population.

Over the past decade, Tencent has ridden the mobile gaming boom with hits like Honor of Kings and Peacekeeper Elite. Gaming remains its primary monetization engine, contributing an estimated 60% of operating income. With deep insight into gamer behavior and substantial financial resources, Tencent is well-positioned to keep developing high‑quality, durable franchises.

At the same time, Tencent has built a broad ecosystem across advertising, payments, cloud, music streaming, and more. The largest untapped lever sits inside WeChat. As China’s dominant super‑app, WeChat is a uniquely powerful marketing channel, and we expect its monetization to rise steadily—primarily via advertising.

The drivers are straightforward: Higher user engagement across Tencent’s properties expands ad inventory; thoughtful increases in ad load lift yield; and AI‑enhanced targeting, powered by WeChat’s data, improves conversion and pricing. Together, these factors support a gradual, durable ramp in WeChat‑led ad revenue.

AI represents a meaningful new growth lever for Tencent. Despite AI chip export restrictions, Tencent’s differentiated approach—allocating GPUs to internal use rather than selling compute like other hyperscalers—allows it to convert AI directly into product and efficiency gains. Because Tencent owns the use cases, it can deploy models where they drive immediate impact. Early results are visible on the advertising side, and the strategy offers greater long‑term visibility.

While games and advertising will remain Tencent’s core revenue drivers, its leading position in financial technology, cloud, and enterprise software offers long-term value creation potential. Given China’s economic scale and widespread digital adoption, Tencent is poised to benefit from these opportunities by transforming its services into substantial revenue streams.

Lastly, Tencent was historically active in external investments but in recent years has shifted toward buybacks and internal reinvestment. Looking ahead, the low‑hanging fruit in external deals is largely gone; we expect a more selective approach and, consequently, fewer opportunities for outsize returns from strategic investments.

Alibaba

• Morningstar Rating: 5 Stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High
• Industry: Internet Retail

Alibaba is the world’s largest online and mobile commerce company as measured by gross merchandise volume. Among its many divisions, the China commerce retail division is its most valuable cash flow-generating business. Shares of Alibaba look 47% undervalued compared with our $241 fair value estimate.

Alibaba is losing market share to PDD and Douyin in the China e-commerce business, and we don’t see a quick fix in the near term. Alibaba’s number of annual active consumers in the China retail marketplace was surpassed by PDD in the fiscal year ended March 2021. Meanwhile, Douyin has gained share from Alibaba, especially in the beauty and apparel categories in recent years, and entered the traditional search-based e-commerce space, competing directly with Alibaba. The number of annual active consumers at Alibaba is close to the ceiling in China. Alibaba’s gross merchandise volume to China’s online retail sales of goods ratio was 62% in the year ended March 2023 at Alibaba, down from 72% in the year-ago period. We believe Alibaba’s marketplace monetization rates will decline in the long run, owing to a mix shift toward Taobao, which has a lower take rate compared with Tmall, and more competition.

In our view, the Taobao and Tmall marketplaces remain as Alibaba’s core cash flow driver and can support the expansion of AliCloud as well as the firm’s globalization strategy, which offers long-term growth potential. While AliCloud will remain in investment mode in the medium term, downsizing low-margin businesses can drive segment margins higher over time. On globalization, the Alibaba international digital commerce group’s year-on-year revenue growth has been strong recently, thanks to AliExpress’ expanding cross-border business.

We expect Alibaba to return more capital to shareholders and increase its return on invested capital after divestments of noncore investments. We are pleased that Alibaba has upsized its share-repurchase program by USD 25 billion until March-end 2027 to USD 35.3 billion. Management targets to lift ROIC (based on Alibaba’s calculation) from single digits in fiscal 2023 to double digits in the next few years. Alibaba had sizable cash and equivalents and investments of CNY 829 billion on its balance sheet as of December 2023.

Arista Networks

• Morningstar Rating: 4 Stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High
• Industry: Computer Hardware

This edition of the best AI stocks to buy now closes with Arista Networks. Arista is a networking equipment provider that primarily sells Ethernet switches and software to data centers. The company Arista counts Microsoft and Meta Platforms as its largest customers and derives roughly three-fourths of its sales from North America. Arista looks 18% undervalued relative to our $230 fair value estimate.

We view Arista Networks as the technology leader in high-speed switching for enterprise networking. We expect Arista to maintain its high market share at the highest speeds and for it to augment its share in lower speeds and campus applications where it has historically been less penetrated. In our view, Arista’s software gives it a structural and durable competitive advantage over competitors in winning new customers, both in the cloud and in the enterprise. We believe this software-led approach provides the firm with a wide economic moat.

Arista’s performance at high speeds and its software-led approach set it apart from other networking equipment providers. Its Extensible Operating System gives customers a highly programmable and modular solution that can scale up and down for networks of any size. Arista has forgone the proprietary hardware-plus-software lock-in approach of Cisco in favor of utilizing cutting-edge merchant silicon and focusing on software development, which allows the firm to offer top-tier performance at a competitive price point. We think its software focus has generated significant intangible assets and embeds it deeply with customers.

We believe Arista will see durably high growth from surging spending toward artificial intelligence. AI networks require the highest speeds available to train and infer upon models using many GPU clusters talking to each other. We believe Arista’s strong position in high-speed switching will make it a meaningful beneficiary of AI spending. We forecast AI to become a primary driver for the firm over the next five years.

Arista is looking to expand from its high-speed cloud heritage into the larger (and in our opinion, slightly stickier) enterprise market. Arista first established itself in the most cutting-edge applications for hyperscalers, but we believe its modular software approach will prove attractive for smaller enterprises building out private clouds or on-premises data centers. Finally, we expect Arista to maintain an excellent profit profile, even with a robust research and development budget maintaining its intangible assets and its ability to exact pricing power.

What Is the Morningstar Global Next Generation Artificial Intelligence Index?

The Morningstar Global Next Generation Artificial Intelligence Index provides exposure to leading-edge AI technologies, including generative AI and adjacent products and services.

The index derives its constituents from the Morningstar Global Markets Index, which represents 97% of the investable market capitalization of developed and emerging markets globally. Companies must be covered by Morningstar’s equity research analysts and have a score of 1 or higher for at least one of the defined subthemes to be eligible for index inclusion.

The four subthemes, as identified by the Morningstar Equity Research Next Generation Artificial Intelligence Committee, are:

Generative AI: This involves the creation of original content. Large language models, such as ChatGPT, are a type of generative AI model that focuses on producing humanlike text.

AI Data and Infrastructure: This encompasses the various technological components needed to manufacture, design, maintain, host, support, and improve AI models. These include semiconductors and data center infrastructure.

AI Software: This includes enterprise and consumer software that incorporates AI models to enhance the user experience and/or improve efficiency.

AI Services: This includes consultancies and outsourced business process companies, which may aid businesses in implementing AI.

Through a standardized scoring process conducted by Morningstar equity analysts, companies are assigned thematic exposure scores for each subtheme. Companies ranked in the top 50 are eligible for inclusion. The index constituents are weighted by float-adjusted market cap. However, the weightings are adjusted, if necessary, to ensure at least 80% of the index is allocated to stocks with meaningful exposure to generative AI. The index is rebalanced quarterly and reconstituted annually.

Investors who would like to extend their search for the top AI stocks can do the following:

• Review the holdings of the Morningstar Global Next Generation Artificial Intelligence Index to investigate further.
• Explore the pointers in Morningstar’s Guide to Investing in Stocks to develop and improve your stock-picking strategies.
• Stay up to date on the tech sector’s performance, key earnings reports, and more with Morningstar’s technology sector page.
• Use the Morningstar Investor screener to build a short list of AI stocks to research and watch.
• Read the latest news about notable AI stocks from Morningstar senior analyst Dan Romanoff.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.