In this article, we take a look at the 10 Must-Buy AI Stocks to Invest In.

Artificial intelligence (AI) was one of Morgan Stanley’s four megatrends in 2025. The bank’s analysts predicted that AI would move from foundations to early game-changing applications. And as a result, companies with AI-adjacent operations would reap significant growth. This is exactly what happened, if a Bloomberg analysis published on December 31, 2025, is anything to go by. According to Bloomberg, 2025 was a massive bull market, with the S&P 500 Index closing the year near 17%. This was a third consecutive year of gains, and enthusiasm around AI was the main driver.

Bloomberg added that leadership within the AI theme rotated from just chipmakers to companies providing data storage and data‑center infrastructure for hyperscalers. This led to new entrants in the index, which all posted triple-digit gains and ranked among the top 20 performers.

Be that as it may, 2026 may see even more groundbreaking developments in the AI sector. And to be specific, Blue Whale Growth Fund’s Stephen Yiu thinks the AI market may splinter. Yiu told CNBC on December 25 that the Q4 2025 pattern of sharp tech sell-offs and rallies was early evidence that AI investors were starting to differentiate between business models rather than buying AI indiscriminately. Yiu split AI companies into three camps: private/start‑up model developers (e.g., OpenAI and Anthropic), listed AI spenders (Big Tech platforms), and AI infrastructure providers (semis, data‑center hardware).

Yiu added that: “So far, every company seems to be winning, but AI is in its early innings… It’s very important to differentiate between different types of companies, which is what the market might start to do.” Most importantly, Yiu argued that investors should strive to be on the receiving end of AI spend; that is, they should invest in infrastructure providers with tangible cash flows rather than in companies that are still burning cash with no clear monetization.

Our Methodology

We used the Finviz stock screener, alongside financial publications, to curate the initial list of companies with significant exposure to the AI sector. We then picked companies with consensus Strong Buy ratings. We also considered institutional interest using Q3 2025 hedge fund holdings data from Insider Monkey and ranked the stocks in ascending order by the number of hedge funds invested in them.

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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).

Note: The upside potential data is as of January 3, 2026.

Must-Buy AI Stocks to Invest In

10. Credo Technology Group Holding Ltd (NASDAQ:CRDO)

Stock Upside: 52.51%

Number of Hedge Holders: 56

Credo Technology Group Holding Ltd (NASDAQ:CRDO) is one of the must-buy AI stocks to invest in. On December 16, BofA cut its price target on Credo Technology Group Holding Ltd (NASDAQ:CRDO) to $200 per share from $240. The investment bank kept a Buy rating on the stock.

According to BofA, 2026 is the halfway point in an 8- to 10-year process of overhauling old IT systems to handle faster AI tasks, like processing huge amounts of data quickly. This upgrade journey, noted the analysts, is driven by the need for more powerful AI, but it’s not without bumps. For instance, stocks in this space might stay volatile because investors are closely watching whether AI investments pay off and how big tech companies manage their spending.

On the brighter side, BofA noted that challenges from greater scrutiny of AI returns and hyperscaler cash flows could be balanced out by two factors. First, quicker progress in building large language models (the brains behind AI chatbots). And, second, specialized AI factories, which would boost demand for companies like Credo.

Meanwhile, on December 11, Barclays maintained a Buy rating on Credo with a $220 price target. Like their counterparts at BofA, Barclays’ analysts cited optimism about Credo’s ability to capture more market share as hyperscalers build out AI factories and upgrade their data centers as the key factor in their decision.

Credo Technology Group Holding Ltd (NASDAQ:CRDO) is a semiconductor company that develops high-speed connectivity solutions for data infrastructure. The company’s portfolio of optical and electrical interconnect products enables efficient data transfer within AI data centers.

9. Nebius Group N.V. (NASDAQ:NBIS)

Stock Upside: 96.17%

Number of Hedge Holders: 65

Nebius Group N.V. (NASDAQ:NBIS) is one of the must-buy AI stocks to invest in. On December 17, Nebius Group N.V. (NASDAQ:NBIS) released Nebius AI Cloud 3.1, an updated version of its full-stack AI cloud platform. The platform is designed specifically for intensive AI workloads.

According to Nebius, the new update introduces next-generation NVIDIA Blackwell Ultra compute capabilities. The capabilities will support customers transitioning from AI experiments to large-scale production deployments. Some of the enhancements in the new update include higher compute, capacity management and transparency, as well as a raft of developer and ecosystem features.

These advancements deliver supercomputer-class performance, stated Nebius. Specifically, the GB300 NVL72 platform now enables rack-scale operations that function like a single giant GPU. This supports demanding tasks such as large-scale model training and high-throughput inference. Also, Nebius AI Cloud 3.1 now expands its ecosystem with a new native integration with Dstack for streamlined workflows. There is also simplified access to NVIDIA BioNeMo NIM microservices without requiring NGC keys or NVIDIA AI Enterprise licenses.

On security and governance, the update strengthens the features with object storage data-plane audit logs supporting HIPAA compliance. There is also per-object access controls, VPC security groups, and enhanced identity management via Microsoft Entra ID integration. Nebius plans a technical walkthrough webinar for the release on January 29, 2026.

Nebius Group N.V. (NASDAQ:NBIS), headquartered in Amsterdam, develops and operates AI cloud infrastructure designed for training and inference of advanced machine learning models. The company offers full-stack GPU clusters and networking solutions through its Nebius AI Cloud platform.

8. Adobe Inc. (NASDAQ:ADBE)

Stock Upside: 31.42%

Number of Hedge Holders: 88

Adobe Inc. (NASDAQ:ADBE) is one of the must-buy AI stocks to invest in. On December 18, Adobe Inc. (NASDAQ:ADBE) announced a multi-year strategic partnership with Runway to enhance its AI offerings. As part of the deal, Adobe becomes Runway’s preferred API creativity partner. This arrangement grants Adobe customers exclusive early access to Runway’s newest video generation models outside of Runway’s own platform.

Adobe said that the partnership will launch with Runway’s newly released Gen-4.5 model, now available for a limited time exclusively in Adobe Firefly alongside Runway’s platform. Firefly is Adobe’s all-in-one generative AI studio. This model, according to Adobe, delivers improved motion quality, better adherence to text prompts, enhanced visual fidelity, realistic physics, and strong temporal consistency. As such, creators will be able to produce complex, multi-element scenes with expressive characters and controllable action.

The company detailed that creators using Adobe Firefly can generate video content from text prompts or references, then seamlessly transfer the outputs into Adobe Creative Cloud applications for further editing, refinement, and integration into professional projects. And as part of the partnership, the companies will collaborate directly with independent filmmakers, major studios, agencies, and enterprises to co-develop specialized AI video capabilities tailored for professional workflows. These new features will be available exclusively within Adobe applications, starting with Firefly, Adobe noted.

Meanwhile, on December 17, Citi’s Tyler Radke raised the price target on Adobe shares from $366 to $387 and maintained a Neutral rating. The adjustment came as Adobe’s Q4 showed clear upside in key metrics, but the company’s guidance for fiscal 2026 appeared mixed, according to the analyst.

Adobe Inc. (NASDAQ:ADBE) is a global leader in creative software and digital media solutions. The company’s Adobe Sensei platform powers AI-driven features across Creative Cloud, Document Cloud, and Experience Cloud. These tools enable automated image editing, content personalization, and intelligent document processing.

7. ServiceNow, Inc. (NYSE:NOW)

Stock Upside: 49.00%

Number of Hedge Holders: 104

ServiceNow, Inc. (NYSE:NOW) is one of the must-buy AI stocks to invest in. On December 22, Jefferies analysts identified ServiceNow, Inc. (NYSE:NOW) as one of the companies that are turning AI into real business growth.

The firm acknowledged that ServiceNow faced multiple compression in 2025 due to investor doubts about keeping up 20% organic growth and risks from bigger acquisitions. However, these headwinds aside, the analysts stated, ServiceNow tops the list because it is ready to bounce back strongly. The key drivers, according to the analysts, include a maturing set of AI tools, fresh AI product launches, more stable spending from the US federal government, and solid overall management.

According to Jefferies, this return to strong growth would mark a recovery from 2025 slowdown fears. As such, ServiceNow will be poised to benefit directly from the ongoing AI surge as companies seek efficient, AI-powered platforms to manage operations.

Meanwhile, on December 19, analysts at Stifel lowered the price target on ServiceNow stock from $1,150 to $230. Stifel explained that this big-sounding drop is purely a technical adjustment; the change reflects the new, higher share count from the split, and their underlying outlook for the company stays exactly the same. The analysts stated further that their EPS estimates were simply updated to match the split.

ServiceNow, Inc. (NYSE:NOW) is a software company that provides digital workflow and enterprise automation solutions. The company’s Now Platform integrates generative AI to automate tasks, enhance productivity, and improve customer and employee experiences.

6. Advanced Micro Devices, Inc. (NASDAQ:AMD)

Stock Upside: 31.83%

Number of Hedge Holders: 115

Advanced Micro Devices, Inc. (NASDAQ:AMD) is one of the must-buy AI stocks to invest in. On December 22, Rosenblatt Securities’ Kevin Cassidy stated that Micron Technology’s upbeat outlook during their earnings call aligned perfectly with Advanced Micro Devices, Inc.’s (NASDAQ:AMD) own ambitions in the server CPU space. According to Cassidy, Micron’s comments point to a revitalized AI market and better conditions in the chip supply chain, which could lift several related stocks. And at the heart of Micron’s positivity is the role of DRAM, which Cassidy described as an essential component to AI systems and that limited supply will result in shortages.

Cassidy noted that despite DRAM prices rising, demand remains robust across all markets. And a key highlight is the surge in server shipments. As per Cassidy, Micron’s server unit volume shipments expectations are now high teens percent year on year from 10% last quarter. This momentum will carry into 2026, he stated.

For AMD, Cassidy pointed out that the strong server unit shipments confirm the company’s recent comments of server CPU TAM doubling to $60B by 2030. The company also set expectations for 50% market share from the current 40%.

Separately, Truist reduced its price target for AMD from $279 to $277 on December 19. The firm left the Buying rating unchanged. This move, the firm said, was part of a broader review of semiconductor and AI stocks, which resulted in updating models after setting estimates for 2027. William Stein, the lead analyst, anticipates some near-term challenges in the AI world, where companies face real hurdles like “finding the power to run AI infrastructure and getting the funding to pay for it.” But despite these issues, Stein is very optimistic about the companies, including AMD. He believes AI infrastructure semiconductor stocks remain cheap relative to their growth.

Advanced Micro Devices, Inc. (NASDAQ:AMD) is a semiconductor company that designs and manufactures processors, graphics cards, and data center solutions. The company’s GPUs and custom chips are used by cloud providers and enterprises to support generative AI and machine learning applications.

5. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)

Stock Upside: 17.81%

Number of Hedge Holders: 194

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is one of the must-buy AI stocks to invest in. On December 18, Morgan Stanley told clients to ramp up their positions in Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) right away. The investment bank explained that it expects a powerful AI‑driven upcycle, faster growth than the market expects, and rising profitability into 2026. To back up the claim, the lead analyst, Charlie Chan, raised the price target for TSMC shares to NT$1,888 from the previous NT$1,688. He also kept an Overweight rating on the stock.

Morgan Stanley expects TSMC to guide 2026 revenue growth in the mid‑20% range, but believes the company will actually deliver closer to 30% year‑over‑year growth. The bank models 2026 revenue growth of 30%, which it says is well above the Street consensus of 22%. Chan and his team argue that consensus underestimates both the strength and durability of TSMC’s AI and advanced‑node demand. This, they said, creates upside as that growth is recognized.

The analysts tied their higher growth view directly to heavy investment. They stated that they arrived at that 30% revenue growth forecast “based on the forecast 2026 capital expenditure of $49 billion and continued 3‑nanometer capacity expansion.” The analysts also argued that the stock remains attractive at 16x or 13x our 2026/2027 average EPS, even after the target hike.

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world’s largest contract chipmaker. It produces advanced semiconductors used in AI training and inference, including GPUs and custom accelerators.

4. NVIDIA Corporation (NASDAQ:NVDA)

Stock Upside: 40.91%

Number of Hedge Holders: 234

NVIDIA Corporation (NASDAQ:NVDA) is one of the must-buy AI stocks to invest in. On December 19, Truist raised the price target on NVIDIA Corporation (NASDAQ:NVDA) stock from $255 to $275, and maintained a Buy rating on the shares. The adjustment came after the firm reviewed the entire semiconductor and AI sector, after which it built fresh financial models that now extend all the way to 2027 estimates.

The firm acknowledged real-world hurdles in the AI boom, noting the difficulties of finding the power to run AI infrastructure and getting the funding to pay for it. Yet, even with these challenges, Truist sees bright prospects ahead. They believe AI infrastructure semiconductor stocks “remain cheap” relative to their growth. Looking into the near future, the analysts expect “more upside pressure” to estimates for the group relative to the diversified analog semis heading into 2026.

In a different update, on December 15, NVIDIA launched its Nemotron 3 family of open models. The family includes three models in different sizes: Nano (30 billion parameters, with about 3 billion active), Super (around 100 billion parameters), and Ultra (around 500 billion parameters). These allow developers to select a model that fits their needs, stated the company.

According to NVIDIA, the key innovation with this model family is the hybrid mixture-of-experts architecture. The architecture combines Mamba and Transformer technologies, which boosts efficiency. For example, Nemotron 3 Nano delivers 4x higher throughput compared to the previous Nemotron 2 Nano. As such, the updated model produces more tokens per second in multi-agent setups.

NVIDIA Corporation (NASDAQ:NVDA) is a semiconductor company. It designs GPUs and data center solutions, which are widely used for training and running large-scale AI models. NVIDIA’s CUDA software platform and AI-focused hardware provide the computational power required for generative AI, machine learning, and high-performance computing applications.

3. Alphabet Inc. (NASDAQ:GOOGL)

Stock Upside: 4.61%

Number of Hedge Holders: 243

Alphabet Inc. (NASDAQ:GOOGL) is one of the must-buy AI stocks to invest in. On December 22, 2025, Alphabet Inc. (NASDAQ:GOOGL) announced a definitive agreement to acquire Intersect Power, a clean energy developer specializing in data center and energy infrastructure solutions. The deal is valued at $4.75 billion in cash; Alphabet will also assume Intersect’s existing debt.

This acquisition builds on an existing partnership. In December 2024, Google, along with TPG Rise Climate, led an over $800 million funding round in Intersect. As a result, Google, whose parent company is Alphabet, secured a minority stake in Intersect. The two companies are also collaborating on developing gigawatts of co-located data center capacity with plans for up to $20 billion in renewable power investments by the end of the decade.

The transaction includes Intersect’s development team, platform, and multiple gigawatts of energy and data center projects. These projects are currently in development or under construction, and many are already tied to Google’s needs. One notable ongoing joint project involves a co-located data center and power site under construction in Haskell County, Texas. But excluded from the deal are Intersect’s existing operating assets in Texas and all operating and in-development assets in California.

In a different update, Wedbush increased its price target on Alphabet shares to $350 from $320, while maintaining an Outperform rating. This adjustment came as part of a broader look at the consumer internet sector following a strong performance in 2025. According to Wedbush, consumer internet companies posted solid gains throughout 2025. The 24 companies Wedbush covers averaged 23% returns, outperforming the NASDAQ’s 19% gain.

Alphabet Inc. (NASDAQ:GOOGL) is the parent company of Google. The company integrates AI across its core businesses including Google Search, YouTube, and Google Cloud. Its DeepMind subsidiary has pioneered breakthroughs in generative AI and reinforcement learning, while its Gemini AI models power advanced applications in productivity, search, and enterprise solutions.

2. Microsoft Corporation (NASDAQ:MSFT)

Stock Upside: 30.55%

Number of Hedge Holders: 312

Microsoft Corporation (NASDAQ:MSFT) is one of the must-buy AI stocks to invest in. On December 22, Wedbush predicted that Microsoft Corporation (NASDAQ:MSFT) will experience massive revenue growth on the back of AI. The firm stated that the market is underestimating the scale of the opportunity heading into 2026. Analyst Dan Ives highlighted that investors are specifically underestimating the Azure growth story, and as such, Microsoft is one of Wedbush’s top picks among large tech companies.

Accordingly, Wedbush reaffirmed its Outperform rating on Microsoft stock with a $625 price target. The analysts labeled the company a “core winner” in its coverage of AI-focused firms. Ives pointed out that “investor skepticism around Microsoft’s AI growth profile has created room for upside surprises,” with the company positioned “in the sweet spot of enterprise strategic AI deployments.” He argued that the stock still has yet to price in the upcoming wave of expansion from cloud and AI services.

Five days earlier, on December 17, Morgan Stanley’s Keith Weiss stated that Microsoft is firing on all cylinders. Weiss arrived at this conclusion after direct meetings with company leaders. According to Weiss, the tech giant has strong customer demand across its businesses, which is fueling steady growth. At the same time, smart AI investments are delivering real profits and setting the stage for even fatter margins ahead. The market, Weiss argued, hasn’t fully priced in this strength. For that reason, Morgan Stanley maintained Microsoft as its Top Pick in large-cap software.

Microsoft Corporation (NASDAQ:MSFT) is a global technology leader. The company integrates AI across its core products, including Microsoft 365, Azure Cloud, and LinkedIn. It also partners with OpenAI to deliver advanced generative AI capabilities through its Copilot platform. Its Azure platform provides enterprises with scalable AI infrastructure, custom chips, and machine learning services.

1. Amazon.com, Inc. (NASDAQ:AMZN)

Stock Upside: 28.07%

Number of Hedge Holders: 332

Amazon.com, Inc. (NASDAQ:AMZN) is one of the must-buy AI stocks to invest in. On December 22, Amazon Web Services (AWS), a subsidiary of Amazon.com, Inc. (NASDAQ:AMZN), announced that the Options Clearing Corporation (OCC) had successfully completed a comprehensive security assessment of its AWS cloud environment. OCC is the world’s largest equity derivatives clearing organization. AWS stated that the assessment was an OCC-AWS partnership, and that it evaluated OCC’s cloud security controls against key regulatory and industry frameworks, including the NIST Cybersecurity Framework (CSF) and Regulation Systems Compliance and Integrity (Reg SCI).

According to AWS, the assessment’s findings confirmed that OCC’s controls aligned with regulatory requirements. They also helped reinforce its overall security posture by integrating leading industry standards and AWS-specific best practices.

Separately, on December 16, BMO Capital raised its price target for Amazon shares to $304 from $300. The firm kept the Outperform rating on the stock unchanged, and continues to view Amazon as a “Top Pick” in its coverage.

The adjustment came after BMO’s cloud experts spoke with former AWS employees, including one with insight into over $4.7 billion in annual cloud spending. According to BMO, these discussions revealed positive trends in AWS, which prompted the firm to increase its growth forecast for AWS in the first quarter of 2026 to 24% from 23%.

Amazon.com, Inc. (NASDAQ:AMZN) is a global e-commerce and cloud computing giant. The company’s AWS platform provides machine learning tools, generative AI services, and custom chips such as Trainium and Inferentia to power AI workloads.

While we acknowledge the potential of Amazon.com, Inc. (NASDAQ:AMZN) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than AMZN and that has 100x upside potential, check out our report about this cheapest AI stock.

READ NEXT: 11 Best NYSE Stocks Under $5 to Buy and 11 Best Healthcare AI Stocks to Buy Now.

Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email below.