Forget the Sell-Off: These 3 AI Stocks Are Still the Best Buys for 2026

Nvidia remains the dominant AI GPU supplier with roughly 92% market share and reported $57 billion in revenue with nearly 90% coming from its data-center business, sustaining gross margins above 70% and operating margins above 60%. Microsoft, while down ~17% year-to-date amid fears of slowing growth and concentrated OpenAI exposure, retains a strong cloud and productivity franchise; Broadcom posted revenue above $18 billion (up 28% YoY) and for fiscal 2025 grew adjusted EBITDA and free cash flow by 35% and 39%, respectively, with a forward P/E near 33 and P/S ~25. The piece frames these three large-cap names as top AI picks for 2026, while flagging the primary macro risk that enterprise AI capex could slow or be delayed.

Analysis

Market structure: Winners are NVDA (maintains ~92% GPU share), AVGO (AI infra capture +35% adj. EBITDA y/y) and hyperscaler cloud stacks (MSFT/Azure) that convert GPU capacity into recurring spend; losers are legacy CPU vendors (INTC) and smaller GPU entrants facing steep R&D and fab barriers. Pricing power remains with Nvidia and Broadcom — expect sustained gross-margin upside near current >70%/60% operating levels for NVDA absent a memory-price crash. Cross-asset: sustained tech capex favors risk-on — tighter corporate credit spreads, higher equity vols (NVDA IV > peers), modest USD strength on tech outperformance; HBM memory tightness supports suppliers/commodities in the near term.

Risk assessment: Tail risks include antitrust probes (US/EU) or export controls within 6–18 months, a sudden capex pullback by top-5 hyperscalers (20%+ slowdown would materially cut demand), or a TSMC/packaging outage that stalls shipments for 4–12 weeks. Immediately (days) expect earnings-driven IV spikes; short-term (3–6 months) watch backlog/concentration metrics (OpenAI revenue share >20% for MSFT); long-term (2–5 years) AI inference adoption supports structural growth but depends on HBM supply and software stack lock-in.

Trade implications: Direct: stagger a 1–2% portfolio long NVDA over 4 weeks, hedge with a 3-month 10%/25% put spread to cap downside; add 1–2% long AVGO via 9–12 month LEAP calls (defined-cost bullish exposure). Pair: long AVGO / short INTC equal notional to play AI infra vs legacy CPUs. Options: run NVDA 3–6 month call spreads on pullbacks and sell OTM covered calls on MSFT to harvest premium while holding core exposure. Entry: accumulate on 10–20% pullbacks, trim at +25–40%, hard stop -15% per lot.

Contrarian angles: Consensus underestimates concentration and operational dependencies (OpenAI/MSFT revenue, HBM supply, TSMC allocation) that can flip winners into volatile names quickly; Broadcom’s fundamentals look underpriced vs consensus — earnings durability > implied by current multiples. Historical parallel: 2016 GPU/memory cycle showed margins can overshoot then normalize; crowded long NVDA/AVGO positions risk a violent unwind if a hyperscaler pauses spend. Use position size limits (max 3% per name) and systemic hedges (index put calendar) to avoid crowd-driven liquidity shocks.

Key Decisions for Investors

• Establish a staggered 1.5% portfolio long in NVDA over 4 weeks (buy tranches on 5%, 10%, 15% intra-day pullbacks); hedge with a costed 3-month put spread (buy 10% OTM, sell 25% OTM) sized to limit downside to ~8–10% of NVDA position value.
• Add a 1.5% long position in AVGO via 9–12 month LEAP calls (choose strike ~10–15% OTM) to capture AI-infrastructure secular growth; take profits on a +30–40% move or re-evaluate if adjusted EBITDA growth falls below +15% y/y next two quarters.
• Implement pair trade: go long AVGO / short INTC equal notional (target pair return 12–18% in 6–12 months if AI infra wins while Intel execution lags); set stop-loss if AVGO/INTC relative moves adverse >12%.
• Sell covered calls on a 2–3% core MSFT holding to generate income while retaining upside — target 6–8 week expiries, 3–5% OTM strikes; unwind if MSFT reports OpenAI revenue concentration >25% of cloud backlog or if stock drops >12% over 30 days.
• Monitor regulatory and supply catalysts over next 30–90 days: (1) antitrust/ export control filings, (2) hyperscaler capex guidance in quarterly reports, (3) HBM price trends — pause new allocations if any catalyst suggests a >20% demand shock.