Investing in AI: A Strategic Guide for Financial Advisors

Artificial intelligence is transforming the world of investing. To find opportunities and stand out from the competition, financial advisors need to stay informed on the evolving industry. 

When you have a deeper understanding of how to invest in AI, it can be easier to identify the right AI stocks and improve your business. Here are key insights to consider. 

Electrical equipment suppliers have emerged as the biggest winners from the surge in AI-driven investment, capturing the most revenue from data centers within the capital goods sector. Schneider Electric leads the pack with approximately $9.5 billion in data center revenue, which is more than 50% higher than its nearest competitor.  

For a deeper look at how AI investment is reshaping the capital goods landscape, download the full Powering Artificial Intelligence report. 

Vertiv ranks second and is the closest to a pure-play data center supplier, with more than three-quarters of its revenue coming from this market. Beyond electricals, exposure to data center spending is limited mainly to thermal and backup power providers such as Carrier, Johnson Controls, Trane, Daikin, Caterpillar, and Cummins. 

Data center construction has soared since the launch of ChatGPT, with spending reaching a record seasonally adjusted rate of $40 billion in June 2025, up 30% year-over-year following a 50% increase in 2024. Data centers now account for 40% of US office construction, up from just 15% in 2021, reflecting both the rapid expansion of AI infrastructure and declines in other commercial segments.  

This boom has driven the growth of electrical equipment suppliers to between two and four times their long-term average, far outpacing the roughly 4% historical growth rate seen since 1982. With AI data centers requiring more power and more complex infrastructure, analysts expect this momentum to continue, keeping electricals at the forefront of the capital goods sector’s AI opportunity. 

In the latest Semiconductor Pulse: Q4 2025, the median semiconductor stock is 6% undervalued, with several leading AI chipmakers appearing particularly attractive. Download the report for a full analysis of the semiconductor industry and investment opportunities. 

AI accelerator revenue, led by Nvidia, continues its meteoric rise, with a compound annual growth rate of 115%. After the November 2022 introduction of ChatGPT sparked the AI “gold rush,” demand for AI semiconductors has accelerated rather than peaked heading into 2026.

Nvidia remains at the center of the AI industry, driven by its dominance in data center sales. The company’s AI accelerator revenue reached approximately $60 billion in the fourth quarter of 2025, reflecting unprecedented growth. Even with temporary setbacks due to China’s export restrictions in the second quarter of 2025, Nvidia continues to sell everything it can build.

Broadcom has emerged as the leading AI custom ASIC vendor, primarily through its work with Google on Tensor Processor development. Google uses these processors to train and run its Gemini large language model and may begin selling or licensing TPUs to other AI vendors, such as Anthropic, in which Google is an investor, and Meta.

AMD is making impressive progress in AI, with accelerator revenue showing a 247% compound annual growth rate. While overshadowed by Nvidia’s massive scale, AMD’s work with OpenAI serves as a meaningful test case for the industry’s need for a second independent GPU vendor.

SK Hynix maintains its lead in the HBM market thanks to the early qualification of its HBM4 products with Nvidia. Samsung has recently gained traction following Nvidia’s qualification of its HBM3E, though it still lags SK Hynix and Micron. Intense demand for HBM has created supply constraints expected to persist through 2027.

Taiwan Semiconductor Manufacturing Co. continues to serve as a critical enabler of AI growth. The world’s leading foundry generated 20% year-over-year revenue growth in December 2025, driven primarily by production for AI chips from Nvidia, AMD, and Broadcom.

TSMC’s dominance stems from its technology leadership and ability to manufacture the most advanced semiconductors. The company has raised its 2026 capital expenditure forecast to expand capacity for future AI chip demand, reflecting confidence in sustained growth.

TSMC maintains a significant gross margin advantage over primary competitors, keeping margins consistently above 50% from 2020 through 2025. While competitors such as Intel and Samsung have experienced fluctuations or declines in profitability, TSMC’s leadership in advanced process nodes allows it to command premium pricing and achieve superior manufacturing efficiencies. This cycle of technology leadership, research investment, and pricing power creates a self-reinforcing competitive advantage.

The five major hyperscalers—Amazon, Microsoft, Google parent Alphabet, Meta, and Oracle—have dramatically increased capital expenditures to support AI infrastructure. These companies remain locked in an AI arms race, with Oracle showing the highest year-over-year growth at 102.6% from December 2022 to December 2025.

Oracle’s aggressive expansion plans to challenge AWS, Azure, and Google Cloud could provide significant additional demand for AI semiconductors if realized. Meta and Oracle have among the highest ambitions for AI buildouts, supporting continued strong chip demand into 2027 and beyond.

Annual hyperscaler capital expenditure should rise in the years ahead, though growth rates are expected to moderate from recent peaks. Cloud computing revenue growth is projected to remain strong, supporting ongoing investment in AI solutions.

Large language models continue to advance rapidly, as measured by the Epoch.AI Capabilities Index. Recent releases such as OpenAI’s o3 and o3-pro, Anthropic’s Claude Opus 4.5, and Google’s Gemini 3 Pro demonstrate that scaling laws are holding, meaning increased processing power continues to drive meaningful improvements in AI capabilities.

The median digital chip stock is 11% undervalued as of Jan. 13, 2026, while analog and mixed-signal chip stocks are fairly valued. Top picks in the semiconductor sector include:

• Nvidia: Dominates AI accelerators with exceptional pricing power and unmatched gross margins
• Broadcom: Leading position in AI custom ASICs, particularly through its Google partnership
• Marvell: Strong positioning in AI infrastructure components
• NXP Semiconductors: Expected rebound in automotive chip revenue as the sector recovers from a cyclical downturn

When it comes to the cybersecurity landscape, AI will be a new demand driver as attacks become more sophisticated. 

Although the AI security market is small right now, we expect rapid growth as the use of applications proliferates. And for good reason—our recent cybersecurity report suggests that the cost of a data breach is almost 50% higher for companies not using AI security compared with those that leverage these tools. 

Given that roughly 10% to 12% of public cloud spending is geared toward security solutions, we forecast the public cloud spending catalyzed by AI will add another $15 billion to $18 billion in security spending. 

Investing in AI can help advisors strengthen investment strategies and offer value. By knowing key considerations, you can choose AI stocks and meet investors’ evolving needs with confidence. Start your Morningstar Investor free trial today to unlock in-depth research, stock analysis, and portfolio insights.