NVIDIA(NASDAQ: NVDA) remains the center of the artificial intelligence boom, but the stock is up just 15% in 2026, both because investors worry that the current pace of AI spending is unsustainable and because they question the durability of Nvidia’s dominance in the AI infrastructure market.
Meanwhile, Digital Ocean(NYSE: DOCN) is a little-known cloud computing company whose aggressive expansion into artificial intelligence services has generated huge returns for shareholders. The stock is up 240% this year and most Wall Street analysts say it is still undervalued. The average price target of $177 per share implies an 8% upside from the current share price of $164.
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Here’s what investors should know about these AI stocks.
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Nvidia: the dominant AI infrastructure provider
Nvidia dominates the artificial intelligence infrastructure. The company is best known for its GPUs, chips that accelerate AI workloads, but its greatest competitive strength lies in vertical integration. Nvidia builds rack-scale AI systems comprising chips and networks, and complements its hardware with an unrivaled developer software ecosystem.
That full-stack strategy gives Nvidia a lasting competitive moat. The company has nearly 90% of the market share in AI accelerators and captures more than 40% of AI data center spending. Nvidia may lose some of its market share in the coming years as custom chips (e.g. Alphabet‘s TPU) becomes more popular, but will almost certainly remain the dominant AI infrastructure provider.
“Our pace of innovation, particularly at our scale, is unmatched, driven by an annual research and development budget approaching $20 billion and our extreme co-design capability in computing and networking on chips, systems, algorithms and software,” Chief Financial Officer Colette Kress recently told analysts. “We intend to deliver x-factor leaps in performance per watt in each generation and expand our leadership position over the long term.”
Nvidia has a major catalyst on the horizon in the upcoming launch of its Vera Rubin platform, which brings together Rubin GPUs and Vera CPUs. Works with Groq 3 LPUs (Language Processing Units) to accelerate inference tasks. When combined with LPUs, Rubin GPUs deliver up to 35x more performance per watt than the previous generation of Blackwell GPUs.
Wall Street estimates that Nvidia’s adjusted earnings will rise 53% annually through the fiscal year ending in January 2028. That makes the current valuation of 45 times adjusted earnings look pretty reasonable. It’s not too late for patient investors to buy Nvidia.
DigitalOcean: the cloud company that simplifies AI services
DigitalOcean provides cloud infrastructure and platform services to small and medium-sized businesses, particularly those in the technology sector. Hyperscalers like it Amazon and microsoft Sure, they have broader portfolios, but their products are designed for large customers with complex needs, lots of money, and large IT departments.
In comparison, DigitalOcean offers fewer and less advanced services, but its platform is designed to simplify cloud computing. Its intuitive user interface with click-and-go options allows developers to spin up servers and deploy applications quickly, often in just a few minutes. DigitalOcean also provides free 24/7 technical support to all customers.
The number of inference tokens processed daily is predicted to increase tenfold by 2030, meaning demand for AI infrastructure is expected to increase substantially. DigitalOcean hopes to capitalize on this boom with its AI-Native Cloud, which brings together the servers and software needed for agent workloads. CEO Paddy Srinivasan called it “the most important product launch” in the company’s history.
DigitalOcean reported strong financial results in the first quarter. Revenue increased 22% to $258 million, driven by exceptionally strong sales growth among AI customers. Non-GAAP net income fell 21% to $0.44 per diluted share, but that was due to significant spending on artificial intelligence infrastructure. “We exceeded all the financial targets we shared in our last call,” Srinivasan told analysts.
DigitalOcean also provided very encouraging guidance, backed by what Srinivasan sees as a “generational market opportunity” in AI. The company says revenue growth will reach 26% in 2026, before accelerating to more than 50% in 2027. Management previously predicted revenue would grow 30% next year, but the company recently secured 60 megawatts of additional computing capacity that will boost sales.
Wall Street estimates DigitalOcean’s adjusted earnings will grow 23% annually through 2028. That makes the current valuation of 81 times adjusted earnings look expensive. The market is excited about the upward revision to earnings guidance, and shares are up more than 50% since the company reported earnings on May 5. I think investors should wait for a pullback before buying shares, or at least keep purchases very small.
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Trevor Jennewine has positions at Amazon and Nvidia. The Motley Fool has positions and recommends Alphabet, Amazon, DigitalOcean, Microsoft and Nvidia. The Motley Fool has a disclosure policy.
This AI stock is crushing Nvidia in 2026. It’s still a buy after soaring 240% this year, according to Wall Street. was originally published by The Motley Fool
