In this article, we will discuss the 5 Best “Pick and Shovel” AI Stocks to Buy for the Long Term. Please visit the 10 Best “Pick and Shovel” AI Stocks to Buy for the Long Term, if you would like to see the extended list and the methodology behind it.

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 (NASDAQ:GOOGL) 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 (NASDAQ:GOOGL) 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. (NASDAQ:GOOGL) 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. (NASDAQ:GOOGL), 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. (NASDAQ:AMZN) 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. (NASDAQ:AMZN), 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 (NYSE:TSM) 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 (NYSE:TSM) is facing here.

Wedgewood Partners stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q1 2026 investor letter:

“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) 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 (NASDAQ:ASML) 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 (NASDAQ:ASML) 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. (NASDAQ:ASML) in its fourth quarter 2025 investor letter:

“Finally, ASML Holding N.V. (NASDAQ:ASML) 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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