The first quarter of 2026 has been rough on artificial intelligence (AI) stocks ... or has it?
On the one hand, share prices of some of the biggest AI stocks, after years of explosive growth, are actually down so far this year. Nvidia (NVDA +2.33%), for example, is down nearly 5% year to date.
NASDAQ: NVDA
Key Data Points
But AI spending doesn't seem to be slowing down ... in fact, it's expected to grow faster than ever. And some AI stocks are soaring to new heights. It's like the market can't make up its mind.
Here's how I'm interpreting the mixed signals the AI stock market is sending, and how I plan to come out ahead.
What the market is saying
If you just look at the AI hyperscalers -- the biggest spenders on AI -- you'd see a story similar to Nvidia's. All of their stock prices are down so far in 2026. Some are only down by single digits: Google parent Alphabet (GOOGL +3.97%) (GOOG +4.00%) has slid just 2.5%, while Apple (AAPL +1.50%) and Amazon (AMZN +1.62%) are down 6.9% and 7.5%, respectively. But Meta Platforms (META +2.31%) has slumped 12.9% year to date, and Microsoft (MSFT 0.63%) shares have tumbled 23%!
Image source: Getty Images.
But if you look beyond the hyperscalers, you get a different picture. Many semiconductor stocks have risen by double-digit percentages even as the king of the semiconductors, Nvidia, has lagged. Taiwan Semiconductor Manufacturing (TSM +0.65%) is up 13.7% for the year. Analog chipmaker Texas Instruments (TXN +3.78%) is up 15.1%. And the company that makes most of the equipment used in high-end microchip fabrication, ASML (ASML +4.02%), is up 22.1%.
This doesn't seem to be a case of 2026 punishing 2025's winners. Vertiv (VRT +0.73%), a company that makes power and cooling systems for data centers, has seen its shares soar 61.8% year to date, on the heels of a 42.6% gain in 2025. Memory chipmaker Micron Technologies (MU +4.72%) is up 32.3% so far in 2026 after a monster 239.1% gain in 2025. Both handily outperformed the S&P 500's 16.4% return in 2025.
So why is the market still showering love on some AI companies, and kicking others to the curb? Here's what I think is going on.
Big spenders
Valuation doesn't seem to be a concern. Of the stocks I listed, Micron has the lowest price-to-earnings ratio, while Vertiv has the highest, and both are outperforming the others. There does, however, seem to be a split in the types of companies that the market is rewarding right now.
Image source: Getty Images.
The companies beating the market are largely manufacturing companies: chipmakers with their own fabrication plants and manufacturers of industrial equipment. These are the companies that are receiving a lot of the AI spend. Meanwhile, the companies doing the spending -- the hyperscalers and the "fabless" semiconductor company Nvidia -- are slumping.
Those big spenders aren't just spending money for the heck of it, though: they expect big returns from their customers down the line. However, the impatient market seems worried that they won't ultimately get a big enough bang for their buck, so it's rewarding companies that are clearly benefiting in the near term.
But if you think, as I do, that AI is a sustainable, long-term trend, now looks like a good time to buy the dip.
