In this article, we will discuss the 10 Best Pick and Shovel AI Stocks to Buy for the Long Term.
Strong tech earnings and ongoing heavy capex are turning even skeptics more bullish on the AI trade. Dan Niles of Niles Investment Management recently said on CNBC that bubble fears around AI do not mean the bull run cannot continue. He believes there is further upside in the AI trade and expects the rally to continue at least into the beginning of next year.
Niles pointed to a recent shift in the AI industry toward agentic AI where models are no longer limited to answering questions but can complete multi-step tasks using external tools and data sources. He said this transition marked a turning point in AI demand, significantly increasing the need for computing power and supporting the broader AI investment cycle.
“Two months prior to OpenClaw being finalized, token growth was about 20% over the prior two months,” Niles said. “And the two months after OpenClaw was finalized, the growth was over 120%. And so you should see at least strong growth, in my opinion, through the beginning of next year. And then you’re going to lap those harder comparisons, and then we’ll see what happens. But that’s one major difference, at least between now and I think year four and five of the internet is you have this major step change in token generation that you need right now.”
Our Methodology
For this article, we selected 10 stocks that sell the tools, infrastructure, and technologies powering the AI revolution. We focused on major AI-related companies with strong growth catalysts and relatively low short interest. Lower short interest was used as a filter to identify stocks with less negative sentiment and fewer bearish bets from investors, helping avoid heavily crowded or highly controversial names.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).
10. Arista Networks (NYSE: ANET)
Short Interest: 1.7%
Arista makes high-speed switches and routing systems used by major cloud players like Microsoft Azure, Meta Platforms, Amazon Web Services, and Google Cloud to connect massive server and GPU clusters. On the software side, it runs its Extensible Operating System that helps automate networks and manage traffic at scale.
The company is seeing strong demand as AI infrastructure buildouts accelerate. Its recent results showed revenue rising about 35% year over year, and it raised its full-year growth outlook to around 28% from 25%.
So why did the stock fall after the results? Expectations were high. Its Q2 guidance came in slightly below estimates, missing by roughly $200 million, which was enough to disappoint investors despite strong fundamentals.
The real driver behind Arista Networks growth is the shift in how data centers are built for AI. Unlike traditional cloud setups, AI workloads require all-to-all networking, where GPUs constantly communicate with each other. That requires high-performance switching and routing. Arista Networks operates right at this layer—its products ensure GPU clusters are fully utilized with minimal idle time. That matters because GPUs are expensive, and companies want to maximize efficiency from every unit.
9. Trane Technologies (NYSE:TT)
Short Interest: 1.7%
Trane Technologies (NYSE:TT) makes heating, ventilation, air conditioning (HVAC), and cooling systems. It builds the systems that keep buildings and data centers cool, energy-efficient, and running properly. Its products include chillers, cooling plants, and now advanced thermal management systems used in large facilities like factories, commercial buildings, and increasingly AI data centers.
Trane Technologies recently raised its outlook amid strong demand for its commercial HVAC and data center businesses. In the first quarter, enterprise organic bookings jumped 24%, while backlog climbed to a record $10.7 billion, up more than 30% from year-end 2025.
Applied Solutions bookings at Trane Technologies surged more than 160% in the first quarter, which shows the level of demand AI is creating for Trane’s solutions. This business sells large commercial HVAC and cooling systems used in places such as data centers, hospitals, airports, factories, and office buildings. It sells products including chillers, cooling plants, air handling systems, ventilation equipment, and building automation systems.
Management also said Stellar Energy could become a $1 billion business within the next 2 to 3 years, which could become another growth catalyst for the stock. Stellar Energy designs and builds large-scale cooling and energy infrastructure systems for hyperscale data centers and industrial facilities, including modular chiller plants and central utility plants.
8. Eaton Corp (NYSE:ETN)
Short Interest: 2%
Eaton Corp (NYSE:ETN) is one of the key beneficiaries of the surge in power demand and the electrification wave that is accelerating after the AI revolution. Eaton is a top AI pick-and-shovel name because it sells the electrical infrastructure and power management systems required to run AI data centers. AI is driving a sharp increase in electricity demand, with the International Energy Agency (IEA) estimating that electricity consumption from data centers could roughly double by 2030.
Eaton provides key products such as switchgear, power distribution units, circuit protection systems, and backup power solutions that are essential for hyperscale data centers. The company benefits directly from the global build-out of AI infrastructure because every new AI facility requires large-scale and reliable electrical systems. Its moat is strong because it operates in a highly specialized, safety-critical segment of the power industry with long design and certification cycles, deep relationships with utilities and hyperscalers, and high switching costs once its systems are embedded into data center architecture.
Janus Henderson Forty Fund stated the following regarding Eaton Corporation plc (NYSE:ETN) in its fourth quarter 2025 investor letter:
“We also are constructive on opportunities for power companies that are capitalizing on the rapid expansion of data center capacity to support AI. These include Eaton Corporation plc (NYSE:ETN), another relative detractor for the quarter. Eaton provides energy-efficient power management solutions for data centers and other industries. After strong performance earlier in the year, the stock declined in the fourth quarter as strong future orders growth was offset by production bottlenecks that resulted in slower-than-expected revenue growth. Investors also worried about the impact of near-term capital spending on margins. We see these as short-term issues, and we continue to believe in Eaton’s multi-year market opportunity powering data centers.”
7. Nvidia Corp (NASDAQ:NVDA)
Short Interest: 1.2%
Nvidia Corp (NASDAQ:NVDA) remains the clear winning pick-and-shovel name in the AI revolution. It makes high-performance GPUs used to train and run large AI models, and since nearly every major AI company depends on this compute power, demand has remained extremely strong.
This tight supply-demand balance has led to a GPU shortage. Data shows GPU availability is at its lowest level since late 2023 and early 2024. As a result, Nvidia Corp has strong pricing power and high demand visibility. The company is also shifting to a one-year product release cycle, down from two years, to better keep up with rapid demand growth and competition.
Another indicator of strong demand comes from Foxconn, a key Nvidia Corp manufacturing partner responsible for a large share of its AI hardware production. In March 2026, Foxconn reported a sharp revenue increase, with monthly sales rising about 10% from January levels, driven by strong momentum from new product launches. This is widely seen as an early signal of ramping production for Nvidia Corp’s next-generation systems.
The upcoming Vera Rubin platform, expected to launch in the second half of this year, is also progressing well. Supplier data suggests production ramp-up is on track, reinforcing expectations that Nvidia Corp’s next major product cycle is executing smoothly.
Polen Focus Growth Strategy stated the following regarding NVIDIA Corporation in its Q1 2026 investor letter:
“At the same time, the angst around an AI bubble and the future return from the vast infrastructure investment spend has seen enthusiasm wane for the immediate beneficiaries. Take NVIDIA Corporation for example, in their most recent earnings report during the quarter they increased revenues in excess of 70% year-over-year and delivered meaningful beats on the top and bottom lines, while significantly increasing forward guidance well above consensus estimates. Despite these stellar numbers, the market reaction was one of disinterest as their shares declined post-print and have languished since despite continued evidence showing there seems to be a long runway of outsized future growth ahead for the company.”
6. Broadcom Inc (NASDAQ:AVGO)
Short Interest: 1.2%
Broadcom Inc (NASDAQ:AVGO) is one of the most important pick-and-shovel names in the AI revolution. It designs custom AI chips for hyperscalers like Google, Meta, and others, tailoring silicon to specific workloads instead of selling general-purpose GPUs. This business involves long co-development cycles, deep integration into customer data centers, and high switching costs, and that’s exactly where AVGO’s moat comes from.
But custom GPUs isn’t the only growth catalyst for the stock. Broadcom plays a central role in Ethernet-based data center infrastructure that moves massive amounts of data between thousands of GPUs. Its high-end switch ASICs are the core engines inside these networks. Key product families like Tomahawk, Trident, and Jericho handle different parts of this process: Tomahawk is used for ultra-high-speed switching in large AI clusters, Trident focuses on flexible enterprise and data center switching, and Jericho is designed for large-scale routing and long-distance, high-bandwidth data movement.
Clearbridge Dividend Strategy stated the following regarding Broadcom Inc. in its Q1 2026 investor letter:
“In IT, we exited Oracle and trimmed Broadcom Inc.. On the semiconductor side, we modestly reduced our position in Broadcom to fund our new investment in Taiwan Semiconductor (TSMC). While Broadcom remains well positioned, and we remain constructive on the stock, the risk-reward outlook has diminished as the shares have tripled over the last two years. Further, whereas TSMC prospers regardless of who wins the semiconductor race (TSMC manufacturers chips for all the major semiconductor companies), one can conceive of scenarios where Broadcom could become less relevant in the future.”
5. Cisco Systems
Short Interest: 1.5%
Cisco benefits from the AI buildout because of its relevance to the networking and connectivity layer that large AI systems depend on. As hyperscalers such as Meta, Amazon, Alphabet, and Microsoft expand spending on data centers, a significant portion of that capital is directed toward networking infrastructure needed to connect massive clusters of GPUs and servers. Cisco Silicon One networking silicon platform and optical networking are used in hyperscaler environments, where performance and low-latency communication between machines are critical for training and running AI models.
Cisco Systems recently surged to new highs, posting its biggest one-day gain since 2011 after strong quarterly results and upbeat guidance. The company’s AI networking business grew strongly, helping drive investor optimism around its position in the AI infrastructure cycle. HSBC upgraded Cisco from Hold to Buy and said AI is becoming a structural tailwind for the company, with AI revenue having a bigger-than-expected financial impact. The firm expects AI to account for about 6% of Cisco’s revenue in fiscal 2026 and around 9% in fiscal 2027.
4. Alphabet Inc (NASDAQ:GOOGL)
Short Interest: 1.4%
TPUs and Google Cloud make Alphabet Inc (NASDAQ:GOOGL) a notable pick-and-shovel name that also benefits from the AI consumption layer.
TPUs (Tensor Processing Units) are custom-built AI accelerator chips developed by Alphabet Inc specifically for machine learning workloads. These chips are optimized for high-efficiency, low-cost AI computation inside Google’s ecosystem. The focus is not maximum flexibility, but maximum efficiency per dollar of compute.
Their demand is expected to increase because companies are increasingly looking for dedicated AI compute resources tailored for training and running large models at scale.
Google Cloud is another reason Alphabet Inc can be considered a pick-and-shovel AI beneficiary. It provides the infrastructure layer for AI development, including compute, storage, networking, and managed AI platforms where companies train and deploy models. Through Google Cloud, customers can access TPUs, GPUs, and full AI development environments without building their own data center infrastructure.
Recently, Google Cloud reported over 60% year-over-year growth (latest reported quarter), with AI-driven demand becoming a key contributor to that acceleration.
L1 Capital International Fund stated the following regarding Alphabet Inc. in its Q1 2026 investor letter:
Portfolio adjustments during the March 2026 quarter were relatively modest, but deliberate. We trimmed investments in AerCap, Alphabet Inc., HCA Healthcare and Weir Group at prices around the top end of our assessed fair value range, with all of these businesses benefitting from positive sentiment intra-quarter. Alphabet’s share price has more than doubled over the past 12 months. This reflects strong performance in core Search, continued momentum in Google Cloud Platform, and better-than-expected progress in AI (Gemini). Today Alphabet has a market capitalisation approaching US$4 trillion. Share prices and fair value are not always aligned, even for the world’s largest companies.
3. Amazon.com (NASDAQ:AMZN)
Short Interest: 1%
Amazon Web Services was already a leader in the cloud market when the AI revolution started, and that position has significantly boosted its growth. Demand has increased as AI companies and enterprises now need far more computing power to train and run large models, driving higher usage of AWS’s GPU-based cloud services and AI chips like Trainium and Inferentia. The result? AWS revenue rose 28% in Q1, amounting to about a $150 billion annualized run rate, marking its fastest growth in 15 quarters.
Amazon Web Services is no longer just a cloud and software-focused AI company. Its AI-focused Trainium chip line is seeing strong demand and rapid scaling. Trainium has already built a backlog of over $225 billion, and that figure had crossed $20 billion earlier while still growing at a triple-digit year-over-year rate.
The Information recently reported that Amazon’s Trainium AI chips are gaining traction with some developers who have traditionally relied on Nvidia’s GPUs. According to the publication, one user said inference workloads moved to Trainium’s newer chips after testing showed costs could be up to 35% lower than Nvidia’s H100. Amazon.com Inc (NASDAQ:AMZN) recently said its Trainium2 chip delivers about 30% better price-performance than comparable GPUs and is largely sold out, showing strong adoption from AI customers. Its next-generation Trainium3 improves performance by another 30% to 40% over Trainium2 and is already nearly fully subscribed.
Vulcan Value Partners stated the following regarding Amazon.com, Inc. in its Q1 2026 investor letter:
“There were seven material detractors to performance: Ares Management Corporation, Ryan Specialty Holdings, Inc., Microsoft Corporation, Salesforce, Inc., UnitedHealth Group Incorporated, Amazon.com, Inc., and SAP SE. Amazon reported strong results for its fiscal year and fourth quarter. During the fourth quarter, AWS’s revenue increased 24% and highly profitable advertising revenue grew 22%. AWS is benefitting from AI driven demand for its cloud services and its growth is accelerating. In addition, Amazon is aggressively building out its promising Leo satellite service that will compete with Starlink. As a result, Amazon’s capital spending is forecast to increase over 50% in 2026 to approximately $200 billion. We expect a solid return on this capital spending. Bears believe that Amazon is investing too much money in capital spending. Our view is that it is a darn good problem to have and that Amazon will become even more competitively entrenched as the leading cloud services provider in the world.”
2. Taiwan Semiconductor Manufacturing Company (NYSE:TSM)
Short interest: 0.5%
Taiwan Semiconductor Manufacturing Company (NYSE:TSM) is effectively selling shovels in a gold rush with a near-dominant position in the industry. Its moat is wide because very few companies can match its scale, manufacturing precision at cutting-edge nanometer nodes, and ability to consistently produce high-yield chips for the world’s most advanced AI designs. Global semiconductor sales reached $99.5 billion in March, a 79% year-over-year surge, according to data from the World Semiconductor Trade Statistics organization.
Taiwan Semiconductor Manufacturing Company has over 60% share of the total foundry market and over 90% of the market for advanced nodes (7nm and below). It makes chips for giants like Nvidia, Apple, Qualcomm, Broadcom and many more.
Read what a Broadcom executive recently said about the demand Taiwan Semiconductor Manufacturing Company is facing here.
Wedgewood Partners stated the following regarding Taiwan Semiconductor Manufacturing Company Limited in its Q1 2026 investor letter:
“Taiwan Semiconductor Manufacturing Company Limited was a top contributor to portfolio performance in the first quarter. Revenues grew +25%, and the Company guided to accelerating revenue growth to +30% in 2026 as demand for compute accelerators for AI applications continues to ramp unabated. In addition, the Company recently reported that March revenue was up +45% year over year, +31% month over month, and +35% year to date. The semiconductor customer base has evolved to the point that the Company increasingly works directly with non-traditional end customers, particularly cloud service providers, to develop custom silicon. This helps the Company better match supply with demand, so despite strong revenue growth, the Company has kept capital expenditures relatively in line with revenue growth. In addition, the Company is raising prices as utilization rates at leading-edge nodes continue to climb. We trimmed positions because our holdings exceeded 10% of portfolios. Taiwan Semiconductor Manufacturing Company remains a top holding.”
1. ASML Holding (NASDAQ:ASML)
Short interest: 0.2%
Think of ASML Holding (NASDAQ:ASML) as the company selling the only ultra-advanced “mining machines” in the AI gold rush. It makes extreme ultraviolet (EUV) lithography machines, which are used to etch incredibly small circuit patterns onto silicon wafers. These patterns are what allow companies like Nvidia, AMD, and Apple to build advanced AI chips. Its customers include leading chipmakers such as Taiwan Semiconductor Manufacturing Company, Intel, and Samsung.
No other company can realistically replace ASML Holding in the near future because EUV lithography depends on extremely complex technologies that took decades to develop, including atomic-level precision mirrors, ultra-high vacuum systems, and light sources so advanced they required billions of dollars in R&D and a tightly integrated global supply chain.
ASML Holding extreme ultraviolet (EUV) systems are already fully booked, underscoring strong demand for advanced chip manufacturing tools. It also raised its full-year revenue outlook to €36 billion–€40 billion, up from a previous range of €34 billion–€39 billion, reflecting continued strength in demand tied to AI infrastructure and advanced semiconductors.
Polen International Growth Strategy stated the following regarding ASML Holding N.V. in its fourth quarter 2025 investor letter:
“Finally, ASML Holding N.V. delivered another solid quarter as semiconductor capital equipment (“semi-cap”) companies continue to benefit from investor optimism around AI. Simply stated, advanced chips sit at the epicenter of everything AI related and ASML’s equipment is essential to printing advanced logic and volatile memory chips. Concerns about a slowdown in the memory chip industry and about Intel’s business waned in the quarter, which helped ignite semi-cap stocks.”
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