Wall Street had its worst day since April 2025 last Thursday. The Nasdaq Composite fell 5.5%, the S&P 500 dropped 4.4%, and the Philadelphia Semiconductor Index plunged 12.2%.
Two worries drove the selling. Investors doubt that heavy spending on artificial intelligence will pay off, and candidates who ran against data center expansion won races in Texas and Georgia in the midterm elections. Mark Hackett, chief market strategist at Nationwide, told Reuters that chip stocks are a volatile, cyclical group in which “when sentiment shifts, the reactions are intense.” Hedge funds, he added, had been selling for weeks.
Why a Wide Moat Matters When Sentiment Turns
A rout like that tests which businesses can protect their profits when investors lose their nerve. An economic moat is a company’s lasting edge over its rivals, the kind that guards its market share and earnings.
Moats come in several forms. A company can be the low-cost producer, own a brand that lets it charge more, or hold patents and licenses that keep copycats out. Scale helps, because large producers spread their costs over more units. High switching costs make customers think twice before moving to a rival. What matters most is how long the advantage lasts and how much it depends on the people running the company.
You might also be interested in our ranking of the 10 Best Semiconductor Stocks to Buy for the Next Decade, the group that took the heaviest hit.
Why the Debate Over AI Spending Is Not Settled
Stocks have bounced since. The S&P 500 and the Nasdaq each climbed more than 1% on Wednesday, and the semiconductor index jumped 7%. Equities have whipsawed all week, though, as worries about slower data center deployment and higher interest rates compete with the urge to buy the dip, Reuters reported.
Brokerages including Morgan Stanley and UBS have called the rout overdone. Morgan Stanley said the likely effect is a push-out of some data center projects from 2028 to 2029, not a derailing of the spending boom. Goldman Sachs estimates that about 45% of planned US data center capacity faces possible restrictions. Our list of the 10 Fastest-Growing AI Stocks to Buy Now covers more of the names caught up in that debate.
Strategists at Yardeni Research wrote in a Friday note that the backlash against data centers and other constraints are “speed bumps, not roadblocks.” They argue that Wall Street is pricing in the roadblocks. Bank of America Global Research analysts said investors bought into last week’s selloff, with institutional clients leading the purchases.
Our Methodology
To pick the stocks for this list, we searched financial news sites, Reddit, X, investing forums and thematic ETFs built around wide-moat companies, looking for businesses with durable competitive advantages. From the stocks that came up most often, we selected the 10 with the largest market caps and ranked them in ascending order of average upside potential, based on analysts’ average price target, as of November 11, 2026. We also list each stock’s number of hedge fund holders as of Q2 2026, from our database of 1,006 hedge funds.
At Insider Monkey, we are obsessed with what hedge funds do. 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. Insider Monkey’s quarterly newsletter strategy selects 14 small-cap and large-cap stocks every quarter and has returned 612% since May 2014, beating its benchmark by 375 percentage points (see more details here).
10 Unrivaled Stocks to Buy for the Next Decade
10. Apple (NASDAQ:AAPL)
Market Cap: $5.06 trillion
Average Upside Potential: -1%
Number of Hedge Fund Holders: 169
China Renaissance analyst Jack Zhou upgraded Apple to Buy from Hold on November 11 and set a $425 price target, the highest on the Street. DZ Bank went the other way a week earlier. It cut the stock to Sell from Hold on November 4, arguing that rising margin pressure meets a high valuation, with memory chip prices squeezing earnings, supply shortages limiting sales and growth in high-margin Services slowing.
Apple’s own outlook backs up some of that worry. The company guided December-quarter gross margin lower, pointing to memory costs and Siri spending, and expects Services to grow more slowly. Still, the September quarter was strong. The iPhone set a September-quarter record, and revenue rose 12% to $114.5 billion.
Apple sells the iPhone, Mac and iPad, and its moat is an installed base of devices that keeps customers in one ecosystem. Adam Sarhan of 50 Park Investments told Reuters that big companies are cutting AI spending, which makes Apple’s restraint look wiser. Our piece Billionaire Ken Fisher and Jim Cramer Still Like Apple (AAPL). Should You? covers why two prominent investors still like the stock.
9. Eli Lilly (NYSE:LLY)
Market Cap: $1.33 trillion
Average Upside Potential: 6%
Number of Hedge Fund Holders: 152
Jefferies raised its price target on Eli Lilly to $1,700 on November 9. The firm argues that the pool of patients outside the United States is about twice the size of the American one, that reaching them will not take deep price cuts, and that adoption abroad will be slower than at home.
Lilly’s third-quarter numbers fit that picture. Revenue rose 39%, and management raised its full-year guidance. Volume grew 53% while realized prices fell 15%, and they fell much faster outside the United States than at home. The new oral obesity pill Foundayo has also started to add sales. In other words, the growth comes from selling far more doses, not from charging more.
Lilly makes the diabetes and weight-loss drugs Mounjaro and Zepbound, and its moat is a deep pipeline and manufacturing scale in GLP-1 medicines that few rivals can match. Most of its revenue comes from that one drug class, so a slip against competitors would hurt. We looked at whether volume can keep outrunning falling prices in Eli Lilly (LLY) Grew Revenue 48% While Prices Fell, Can Volume Keep Winning? Formal guidance for 2027 is due in January.
8. Visa (NYSE:V)
Market Cap: $777.33 billion
Average Upside Potential: 9%
Number of Hedge Fund Holders: 194
Visa’s net revenue rose 15% to $45.9 billion in fiscal 2026, and management expects low-double-digit growth in the year ahead. The company runs the world’s largest card network and collects a small fee as payments move between merchants, banks and consumers. Its moat is the network itself. Merchants accept the card because consumers carry it, and consumers carry it because merchants accept it.
TD Cowen analyst Bryan Bergin kept a Buy rating and raised his price target to $450 on October 28. He called fiscal 2026 a banner year, with strength in core payments, commercial and money-movement products and value-added services. He expects value-added services to keep growing above 20% as Visa builds stablecoin settlement and what he calls an agentic future. Payments volume kept growing in the fiscal fourth quarter, and management raised the dividend.
The drag is what Visa pays its customers. Incentives to banks and merchants keep rising, which cuts into the revenue the network keeps, and higher renewal activity ahead could reset those terms. We put that question to Visa’s valuation in Visa (V): Are Bigger Client Rebates Worth the Valuation?
7. Microsoft (NASDAQ:MSFT)
Market Cap: $3.99 trillion
Average Upside Potential: 19%
Number of Hedge Fund Holders: 273
Azure grew 48% last quarter, up from 42% the quarter before, which shows Microsoft’s cloud business is still speeding up. Commercial remaining performance obligations rose 73% to $677 billion, so much of the coming demand is already under contract.
The question is what it costs to serve that demand. Griffin Securities downgraded the stock to Neutral from Buy on October 29, a day after the quarterly report, reportedly because heavy capital spending and a debt-funded AI buildout are weighing on cloud gross margins. Spending on data centers keeps climbing, and free cash flow fell by more than a quarter in the latest period as leases and construction costs added up. Investors are asking whether AI revenue will turn into enough profit.
Microsoft sells Windows, Office and the Azure cloud, and its moat is how deeply businesses build their daily work around all three. Leaving is expensive and disruptive. Supporters see the spending as chasing orders already signed. Whether profit can grow before costs catch up is the question in Microsoft (MSFT) Built a $100B Azure. Can It Outrun Its Own Spending?
6. Taiwan Semiconductor Manufacturing (NYSE:TSM)
Market Cap: $2.15 trillion
Average Upside Potential: 33%
Number of Hedge Fund Holders: 249
Bernstein analyst Mark Li raised his price target on Taiwan Semiconductor Manufacturing to $600 on November 4 and kept an Outperform rating. He points to growing demand for custom CPUs that Amazon and Google design for their own use, and to the 2-nanometer process as a central growth driver. Agent-style AI workloads are speeding up CPU demand, he argues, even as PC and low-end smartphone demand has come in softer.
TSMC builds chips for other companies, and its moat is manufacturing know-how that no competitor has matched at scale. Chips at 7-nanometer and smaller sizes made up 79% of wafer revenue last quarter. Revenue grew 41.2% and landed above the top of the company’s guidance, and management is spending $60 billion to $64 billion this year to keep the lead.
The risks are structural. Nearly all of the most advanced production sits in Taiwan, and a handful of large customers account for much of the demand. Our look at whether the valuation can absorb that is in TSMC’s Profit Soars 69%, but Can its Next Chip Breakthrough Justify the Valuation?
5. Alphabet (NASDAQ:GOOGL)
Market Cap: $3.54 trillion
Average Upside Potential: 35%
Number of Hedge Fund Holders: 275
Google Cloud revenue more than doubled last quarter, rising 103% to $30.7 billion, and the unit earned $11.1 billion in operating income. Supporters see Cloud, the Gemini AI models and the company’s own TPU chips, a new generation of which arrived this week, as several ways to make money from AI at once.
The stock still fell sharply after the report. Capital spending is soaring, free cash flow turned negative, and investors worry that AI answers will erode Search. BNP Paribas analyst Nick Jones kept an Outperform rating but cut his price target to $410 on October 29, citing Search trends and margin pressure as spending rises. Search itself still grew in the quarter, which eases that fear somewhat.
Alphabet also owns YouTube, Android and the Waymo robotaxi service, but its moat is the reach of Search and the data and distribution that come with it. Management has said spending will climb again next year, so the debate is whether Cloud can grow into the bill. Waymo’s value is a separate question, and we asked it in Alphabet (GOOGL): Does Its Valuation Account for Waymo’s Potential?
4. Broadcom (NASDAQ:AVGO)
Market Cap: $1.66 trillion
Average Upside Potential: 52%
Number of Hedge Fund Holders: 170
D.A. Davidson analyst Gil Luria upgraded Broadcom to Buy from Neutral on October 27 and set a $400 price target. He argues that Anthropic’s IPO filing shows the AI spending cycle is not over yet. Anthropic is Broadcom’s largest infrastructure partner, and Luria expects its IPO to go ahead, followed by an OpenAI offering next year, which would support Broadcom’s growth. He reads the filing as showing that Anthropic has ample cash and healthy margins.
He says the shares trade as though the odds of both offerings are near zero. At about 16 times 2027 earnings, they sit at a steep discount to the rest of the AI chip group.
Broadcom designs custom AI accelerators for the largest cloud companies, along with networking chips and infrastructure software. Its moat is the engineering relationships behind the custom chips, which are costly to replace. The risk is dependence on outside events. The upside hinges on Anthropic completing its listing and OpenAI raising money behind it, which ties growth to a handful of AI labs. Broadcom’s AI Revenue Surges 221%, But is Growth Becoming Too Dependent on AI Spending? takes up that dependence.
3. ASML (NASDAQ:ASML)
Market Cap: $596.36 billion
Average Upside Potential: 53%
Number of Hedge Fund Holders: 140
Customers want to place orders for 2029 and 2030, even as ASML says it cannot fully meet demand for 2027 and 2028. ASML is the only company that makes the extreme ultraviolet lithography machines used to print the most advanced chips. That monopoly is its moat, reinforced by service and upgrade revenue that its installed machines keep generating after the sale. Third-quarter net sales hit a record €11.7 billion.
UBS reiterated its Conviction Buy rating after the third-quarter report. The bank noted that operating profit ran about 5% ahead of consensus and that the midpoint of fourth-quarter guidance implied a beat of about 7%. It expects consensus earnings per share for 2027 and 2028 to rise by 5% to 10% as analysts catch up.
The stock is not cheap, though, and ASML’s sales depend on a few customers whose spending can swing with sentiment toward AI and data centers. That leaves investors weighing a sold-out outlook against how much of it the price already assumes. Our article ASML (ASML) Says It Cannot Meet Demand Until 2028. Is the Stock Priced for That? takes up that question.
2. Nvidia (NASDAQ:NVDA)
Market Cap: $4.20 trillion
Average Upside Potential: 90%
Number of Hedge Fund Holders: 285
A board investigation into Chief Executive Jensen Huang has put Nvidia in an unfamiliar spotlight. Directors announced on Sunday that they are examining whether Huang was the target of a foreign-intelligence effort, and he has admitted to an affair, Reuters reported. The shares fell sharply on Monday and Tuesday, and the board has said it has confidence in him.
Nvidia designs the GPUs that power AI workloads and the CUDA software developers build on. That ecosystem is the core of its moat. RBC Capital reiterated its Outperform rating with a $330 price target on November 9. The firm expects a revenue beat in the coming quarter on strong GPU rental prices and hyperscaler spending, and it calls a valuation of about 12 times 2027 earnings compelling.
Baird’s Tristan Gerra took the opposite view on Wednesday. He downgraded the shares to Neutral and cut his price target to $200, citing uncertainty over Huang’s tenure, government action and limited visibility into 2027 data center demand. Results are due next week. On margins, our piece Nvidia Is Becoming More Than a Chipmaker. Can it Sustain Its Exceptional Margins? asks whether they can hold as the company grows beyond chips.
1. Micron Technology (NASDAQ:MU)
Market Cap: $875.99 billion
Average Upside Potential: 110%
Number of Hedge Fund Holders: 184
Citi analyst Atif Malik reiterated a Buy rating on Micron with a $1,300 price target on October 29, after meetings with management. He argues that the market underestimates how long DRAM and high-bandwidth memory supply will stay tight, through 2027 and 2028. He also expects Micron’s supply agreements to improve its revenue visibility.
Micron is one of the few makers of DRAM and NAND memory, including the high-bandwidth memory that sits next to AI accelerators. Its moat is the cost of entry. A memory plant takes enormous capital and years of know-how, though the business is cyclical enough that some investors question whether it deserves the label at all.
The stock trades at about 5 times forward earnings, which suggests investors doubt the current margins will last. Risks include a labor dispute at Micron’s Taiwan plants, where workers want a bigger share of the profits and the fight has reached a construction site, and a data center slowdown after the midterms. The shares fell 17.5% a week ago in the broader chip rout. What Wall Street may be missing is the subject of Micron (MU) Is Trading at 5x Earnings Despite 87% Margins. What Is Wall Street Missing?
READ NEXT: Does Micron (MU) Have an Economic Moat at All? and Jim Cramer and Ken Fisher’s AI Pick: Microsoft (MSFT)
