The Best AI Stocks to Buy Now

The already-choppy AI trade got bumpier at the end of October, when third-quarter earnings arrived. Investors already showed signs of worry about hyperscalers’ ability to generate sufficient returns on their massive capital expenditures. Those concerns intensified as results from industry names like Google parent company Alphabet GOOGL/GOOG and Amazon AMZN disappointed investors.

“I think the market is just becoming more and more interested in how companies are actually utilizing AI as opposed to just building AI,” says David Sekera, Morningstar’s chief US market strategist.

The Morningstar Global Next Generation Artificial Intelligence Index has seen considerable growth in 2026, up more than 20% this year to date, owing to the AI infrastructure buildout.

The AI stocks on this list were among the index’s top constituents and earned

1. Nvidia NVDA
2. Taiwan Semiconductor Manufacturing TSM
3. Broadcom AVGO
4. Meta Platforms META
5. Alphabet GOOGL
6. Tencent Holdings TCEHY
7. Alibaba Group BABA
8. Marvell Technology MRVL
9. Oracle ORCL
10. Adobe ADBE
11. Baidu
12. CoreWeave CRWV

Here’s a little more about each of the best AI stocks to buy, including commentary from the Morningstar analyst who covers the stock. All data is as of Nov. 3.

Nvidia NVDA

• Morningstar Rating: 4 Stars
• Morningstar
  Economic Moat
  Rating: Wide
• Morningstar
  Uncertainty Rating
  : Very High
• Industry: Semiconductors

Nvidia opens the latest edition of the best AI stocks to buy now. Nvidia is a leading developer of graphics processing units and the software platform Cuda, used for AI model development and training. This AI stock currently looks 33% undervalued relative to our $310 fair value estimate.

Nvidia has a wide economic moat, thanks to its market leadership in graphics processing units, hardware, software, and networking tools needed to enable the exponentially growing market around artificial intelligence. In the long run, we expect tech titans to strive to find second-source or in-house solutions to diversify away from Nvidia in AI, but these efforts will, at best, only chip away at Nvidia’s AI dominance.

Nvidia’s GPUs run parallel processing workloads, using many cores to efficiently process data at the same time. In contrast, central processing units, such as Intel’s processors for PCs and servers, or Apple’s processors for its Macs and iPhones, process the data of “0’s and 1’s” in a serial fashion. The wheelhouse of GPUs has been the gaming market, and Nvidia’s GPU graphics cards have long been considered best of breed.

More recently, parallel processing has emerged as a near-requirement to accelerate AI workloads. Nvidia took an early lead in AI GPU hardware, but more importantly, developed a proprietary software platform, Cuda, and these tools allow AI developers to build their models with Nvidia. We believe Nvidia not only has a hardware lead but also benefits from high customer switching costs around Cuda, making it unlikely for another chip designer to emerge as a leader in AI training. Nvidia’s expansion into networking has been impressive, allowing customers to cluster AI GPUs together for AI training.

We think Nvidia’s prospects will be tied to the AI market, for better or worse, for quite some time. We expect leading cloud vendors to continue to invest in in-house, while AMD is also working on GPUs and AI accelerators for the data center. However, we view Nvidia’s GPUs and Cuda as the industry leaders, and the firm’s massive valuation will hinge on the pace of AI buildouts in the years ahead.

Read more about Nvidia here.

Taiwan Semiconductor Manufacturing TSM

• Morningstar Rating: 4 Stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium
• Industry: Semiconductors

Taiwan Semiconductor Manufacturing is the world’s largest dedicated chip foundry, with about 70% market share in 2025. Its scale and high-quality technology allow the firm to generate solid operating margins, even in the highly competitive foundry business. Shares of this affordable AI stock are currently trading 24% below our fair value estimate of $534.

Taiwan Semiconductor Manufacturing Co. is the world’s largest dedicated contract chip manufacturer, or foundry, with over 70% market share as of mid-2026. It makes integrated circuits for customers based on their proprietary IC designs. TSMC has long benefited from semiconductor firms around the globe transitioning from integrated device manufacturers to fabless designers. Like all foundries, it assumes the costs and capital expenditures of running factories amid a highly cyclical market for its customers. Foundries tend to add excessive capacity during times of burgeoning demand, which can result in underutilization during downturns, which hampers profitability.

The rise of fabless semiconductor firms has supported the growth of foundries, which in turn has encouraged increased competition. However, most of these newer competitors are confined to low-end manufacturing due to prohibitive costs and engineering know-how associated with leading-edge technology. To prolong the excess returns enabled by leading-edge process technology, or nodes, TSMC initially focuses on logic products, mostly used on central processing units and mobile chips, then focuses on more cost-conscious applications. This strategy has been successful, illustrated by the fact that the firm is one of the two foundries still possessing leading-edge nodes while dozens of peers lag.

We note two long-term growth factors for TSMC. First, the consolidation of semiconductor firms is expected to create demand for integrated systems made with the most advanced nodes. Second, organic growth of artificial intelligence, Internet of Things, and high-performance computing applications may last for decades. AI and HPC play a central role in quickly processing human and machine inputs to solve complex problems like autonomous driving and language processing, which accentuates the need for more energy-efficient chips. Cheaper semiconductors have made integrating sensors, controllers, and motors to improve home, office, and factory efficiency possible.

Read more about Taiwan Semiconductor Manufacturing here.

Broadcom AVGO

• Morningstar Rating: 5 Stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High
• Industry: Semiconductors

Broadcom is one of the largest semiconductor companies in the world and has also expanded into infrastructure software. Its semiconductors primarily serve computing, wired connectivity, and wireless connectivity. It has a significant position in custom AI chips to train and run inference for large language models. Shares of Broadcom currently trade 49% below our fair value estimate of $650.

Broadcom is an amalgamation of high-value, differentiated, and moaty chip and software businesses. Put simply, Broadcom is a prolific generator of cash flow. It is a terrific aggregator of firms, big and small. Its ability to acquire and streamline generates strong profits and cash flow and fuels robust shareholder returns. We laud the company for its execution and operating efficiency, which build upon its large organic investment and help it to outperform its end markets organically.

In our view, Broadcom’s networking and custom chip businesses are its strongest and the primary drivers of the company’s wide economic moat and results. We expect it to retain a dominant position in merchant silicon for switching and routing applications, where we see it as best-of-breed for high speeds. We also expect it to hold a formidable position in custom artificial intelligence accelerators as it benefits from hyperscale cloud vendors building chips to reduce their reliance on Nvidia. We see Broadcom as the key secondary AI compute vendor to Nvidia as hyperscalers further pursue custom silicon to gain performance, save money, and avoid vendor lock-in.

Outside of chips, Broadcom’s software businesses sell virtualization software, mainframe software, and cybersecurity software, and we see its offerings as highly competitive. Broadcom’s focus on strategic large software customers like financial institutions, governments, and large enterprises—where it is deeply embedded—elicits steep switching costs. We also see upselling opportunities with VMware under the firm’s belt.

We expect Broadcom to grow rapidly as a result of its skyrocketing AI chip business. We believe AI is already the primary driver of Broadcom’s results. To us, an investment in Broadcom today is an investment in its AI chip and networking businesses. Outside of AI, we see more moderate growth led by VMware and non-AI networking. We expect acquisitions to still be on Broadcom’s radar, but perhaps with larger, less frequent deals. After the 2023 VMware purchase, we expect the company to focus on deleveraging for a couple of years before tapping the acquisition market again.

Read more about Broadcom here.

Meta Platforms META

• Morningstar Rating: 4 Stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High
• Industry: Internet Content & Information

Meta is the largest social media company in the world, boasting more than 3.5 billion monthly active users worldwide. This AI stock currently looks 27% undervalued relative to our $850 fair value estimate.

We view Meta as the clear winner in social media. The firm’s application lineup, which includes Facebook, Instagram, WhatsApp, and Messenger, has more than 3.5 billion monthly active users, giving Meta unmatched scale in the sector.

The firm’s strategy is dual-pronged. On the user side, Meta has leveraged its scale and social media savvy to iteratively improve its product lineup, adding attractive features such as Stories, Reels, and even new products such as Threads. Such improvements/additions not only improve user engagement but also allow Meta to monetize these features/products by layering advertisements onto them.

On the advertising side, Meta allows advertisers of all shapes and sizes to place ads in front of engaged users. The company has benefited greatly from a general shift toward digital advertising within the broader advertising market, with social media advertising gaining substantial share. To bolster its advertising business, Meta has invested heavily to improve its ad-targeting algorithms, with AI-driven improvements in its ad-tech allowing the firm to improve its advertisers’ return on ad spending and increasing its average revenue per user over time.

While the firm’s core business remains advertising, Meta has shown a proclivity to expand beyond its ad-based revenue model by investing heavily in hardware, via Reality Labs, and AI, by investing in its own frontier large language models. While the firm’s investments in Reality Labs have been demonstrably unprofitable, we are more optimistic about Meta’s investments in AI. We believe Meta’s AI investments are value-accretive.

Beyond ad-targeting, Meta is also investing in consumer-facing AI, via Muse agent and Meta AI. While a monetization strategy for consumer-facing AI remains elusive in the near term, we believe the firm could drive increased user engagement/time spent across its platforms as well as potentially capture a small take-rate on agentic commerce conducted by its agents.

Read more about Meta Platforms here.

Alphabet GOOGL

• Morningstar Rating: 5 Stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium
• Industry: Internet Content and Information

Alphabet is a holding company that wholly owns internet giant Google. The California-based company derives slightly less than 90% of its revenue from Google services, the vast majority of which is advertising sales. This AI stock is trading at a 38% discount to our fair value estimate of $450.

We view Alphabet as a conglomerate of stellar businesses. With solutions ranging from advertising to cloud computing and self-driving cars, Alphabet has built itself into a true behemoth, generating hundreds of billions of dollars in revenue annually. While antitrust concerns around Alphabet’s core search business have made headlines, we retain our confidence in Alphabet’s overall strength and foresee the firm remaining at the forefront of a variety of verticals, including search, artificial intelligence, video, and cloud computing.

Alphabet’s core strategy is to preserve its strong advertising business, with the majority of advertising revenue coming from Google Search. To that end, the firm has invested considerably over the years to improve its search capabilities, ensuring that its search engine remains deeply embedded in how hundreds of millions of users access information on the web.

We see the firm’s investments in AI as a continuation of this effort to safeguard its core product, Google Search. We believe that by leveraging generative AI, Google can not only improve its own search quality via features such as AI Overviews and AI Mode but also improve its advertising business by augmenting its ability to target customers with relevant ads.

Beyond search, we have a positive outlook on Alphabet’s cloud computing platform, Google Cloud. We believe increased migration of workloads to the public cloud and an uptick in the deployment and usage of AI are key growth drivers for Google Cloud over the next five years. Within its cloud segment, we like the firm’s strategy of pursuing both software, via Google Cloud offerings, and hardware, via external TPU placements and sales. We believe that a mixture of software- and hardware-led growth will enable Google Cloud to scale and become a more important part of Alphabet’s overall business, both from a top-line and profitability perspective.

Read more about Alphabet here.

Tencent TCEHY

• Morningstar Rating: 5 Stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High
• Industry: Internet Content and Information

Tencent is the world’s largest game publisher and operates WeChat—China’s super-app with roughly 1.3 billion users—embedded in daily life for messaging, short video, mini programs, payments, and shopping. Tencent looks 49% undervalued compared with our $99 fair value estimate.

Over the past decade, Tencent has ridden the mobile gaming boom with hits like Honor of Kings and Peacekeeper Elite. Gaming remains its primary monetization engine, contributing an estimated 60% of operating income. With deep insight into gamer behavior and substantial financial resources, Tencent is well-positioned to keep developing high‑quality, durable franchises.

Tencent has built a broad ecosystem across advertising, payments, cloud, music streaming, and more. The largest untapped lever sits inside WeChat. As China’s dominant super‑app, WeChat is a uniquely powerful marketing channel, and we expect its monetization to rise steadily, primarily via advertising.

The drivers are straightforward: Higher user engagement across Tencent’s properties expands ad inventory; thoughtful increases in ad load lift yield; and artificial intelligence‑enhanced targeting, powered by WeChat’s data, improves conversion and pricing. Together, these factors support a gradual, durable ramp in WeChat‑led ad revenue.

AI represents a meaningful new growth lever for Tencent. Despite AI chip export restrictions, Tencent’s differentiated approach—allocating GPUs to internal use rather than selling compute like other hyperscalers—allows it to convert AI directly into product and efficiency gains. Because Tencent owns the use cases, it can deploy models where they drive immediate impact. Early results are visible on the advertising side, and the strategy offers greater long‑term visibility.

While games and advertising will remain Tencent’s core revenue drivers, its leading position in financial technology, cloud, and enterprise software offers long-term value creation potential. Given China’s economic scale and widespread digital adoption, Tencent is poised to benefit from these opportunities by transforming its services into substantial revenue streams.

Tencent was historically active in external investments, but in recent years it has shifted toward buybacks and internal reinvestment. Looking ahead, the low‑hanging fruit in external deals is largely gone; we expect a more selective approach and, consequently, fewer opportunities for outsize returns from strategic investments.

Read more about Tencent here.

Alibaba BABA

• Morningstar Rating: 5 Stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High
• Industry: Internet Retail

Alibaba is the world’s largest online and mobile commerce company as measured by gross merchandise volume. Among its many divisions, the China commerce retail division is its most valuable cash-flow-generating business. Alibaba’s shares look 52% undervalued compared with our $207 fair value estimate.

Alibaba’s midterm strategy centers on defending its cash-generative Chinese e-commerce marketplace, Taobao and Tmall, while redeploying capital into higher-growth AI cloud and AI services.

Taobao and Tmall are losing wallet share on three fronts we do not expect to reverse: to Pinduoduo on price-led discovery, to Douyin on content-led discovery, and to Meituan on instant delivery of low-ticket retail. Alibaba started engaging in heavy subsidies in quick commerce in 2025 to drive traffic and cross-sells to Taobao and Tmall, and more importantly, to develop another sizable and monetizable online retail platform in the long run. Quick commerce is margin-dilutive in the medium term, with targeted profitability in fiscal 2029. We expect quick commerce to help Alibaba to defend its online retail position.

The AI cloud and compute service segment is a compelling long-duration story. This segment consists of cloud and model-as-a-service business. Alibaba is the public-cloud leader in China and owner of the Qwen open- and closed-source models. Its announced three-year CNY 380 billion AI/cloud capital expenditure positions it as China’s most credible full-stack hyperscaler—compute, foundation model, and application layer under one roof. Given that the state-of-the-art Qwen models are already driving usage of Alibaba Cloud, we expect Alibaba’s external cloud revenue to compound along with margin expansion as generative-AI workloads scale. Despite competition from ByteDance’s Volcano Engine and Huawei Cloud, we think the addressable market is large enough for multiple winners.

The AI labs and consumer applications segment is a loss center for the next several years. Competing with ByteDance, Tencent, DeepSeek, and many others on frontier model capability is capital-intensive, while switching costs among users is low. Monetization remains thin and unproven, as the industry is still at a very early stage, and no player in China has demonstrated a profitable AI business model at scale.

Read more about Alibaba here.

Marvell Technology MRVL

• Morningstar Rating: 5 Stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High
• Industry: Semiconductors

Marvell Technology is a fabless chip designer focused on wired networking, where it has the second-highest market share. Among our affordable AI stocks, Marvell looks 47% undervalued compared with our $326 fair value estimate.

We see Marvell as a differentiated provider of networking and processing chips into data centers, enabling impressive growth and profitability. Between switching, processing, and optical chips, Marvell has one of the broadest networking silicon portfolios in the world, and we believe it is primed to expand faster than its underlying markets as future networking setups utilize greater content, and we anticipate Marvell will continue to win share even in an expanding market. In particular, we believe Marvell will be a significant beneficiary of investment in generative artificial intelligence, with its strong position in optical chips and a burgeoning custom accelerator business.

We expect Marvell to continue competing at the cutting edge of networking silicon with chip heavyweights like Broadcom and Nvidia. Marvell’s billions in cumulative R&D investment, both organically and via acquisitions, have generated design prowess, and we see its strong customer relationships with cloud providers and networking equipment vendors alike as sticky. Marvell wins designs using its broad portfolio of intellectual property to create tailored or customized solutions, and earns impressive profits while doing so. In our view, Marvell merits a narrow economic moat rating.

We expect Marvell to continue enjoying heady growth from its strong exposure to data center and AI spending. Marvell has increased its revenue by more than 20%, annualized, since fiscal 2021 (calendar 2020) as it has pivoted its business to fully focus on data center customers. We credit strong acquisitions for opening up new markets (Avera for custom silicon, Inphi for optics, and Celestial for copackaged optics), but believe Marvell executes with aplomb to drive organic growth as a consolidated company. Going forward, we see a natural confluence of rapid data center and AI infrastructure investments with Marvell’s portfolio of networking, optical, and custom compute chips. We forecast strong organic growth but expect Marvell to continue to look to acquisitions as a way to enter new, adjacent markets.

Read more about Marvell Technology here.

Oracle ORCL

• Morningstar Rating: 4 Stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Very High
• Industry: Software—Infrastructure

Oracle provides enterprise applications and infrastructure offerings through a variety of flexible IT deployment models, including on-premises, cloud-based, and hybrid. This affordable AI stock is trading at a 35% discount to our $195 fair value estimate.

The initial success of Oracle Cloud Infrastructure comes from its technological innovation that makes it a flexible and secure alternative to established hyperscalers like Amazon Web Services, Microsoft Azure, or Google Cloud Platform. More recently, OCI’s strong client focus and ability to scale put it squarely at the center of the booming artificial intelligence ecosystem, leading to skyrocketing bookings with key AI stakeholders such as OpenAI, Meta, and xAI. We believe OCI is on track to become a leading infrastructure provider for AI training and inference workloads; however, Oracle also faces significant challenges in securing the necessary resources, most particularly GPU chips, to deliver the capacity required by its AI customers.

Oracle has long been a major supplier of both relational database systems and enterprise software. The company’s relational database boasts a premium market positioning that offers industry-leading security and stability at a higher price. Although Oracle Database still plays a dominant role in handling some of the world’s most mission-critical data workflows, the company’s dominance in the database industry is gradually fading due to emerging database products more tailored to enterprises’ specialized data workflows. We think Oracle has made substantial progress in modernizing its database offering by bringing multicloud database to other hyperscalers. This is a win-win-win arrangement that benefits Oracle, other cloud providers, and customers simultaneously. As Oracle further expands its portfolio with AI Lakehouse and AI Data Platform, we expect the database to remain an important growth engine for the company.

Oracle is one of the only companies that offers an integrated AI portfolio across data, infrastructure, and software. We think Oracle’s current product lineup is in the best shape it has been in, and the company has the capacity to both retain its traditional on-premises customers migrating to the cloud and acquire new customers. In our view, the cloud transition will continue to serve as a tailwind to Oracle’s revenue growth in the coming years.

Read more about Oracle here.

Adobe ADBE

• Morningstar Rating: 4 Stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High
• Industry: Software—Application

Adobe provides content creation, document management, and digital marketing and advertising software and services to creative professionals and marketers. The company operates in three segments: digital media content creation, digital experience for marketing solutions, and publishing for legacy products. Shares of this undervalued AI stock trade at a 28% discount to our $344 fair value estimate.

Adobe has come to dominate content creation software with its iconic Photoshop and Illustrator solutions, both now part of the broader Creative Cloud. Over the years, the firm has added new products and features to the suite through organic development and bolt-on acquisitions to drive the most comprehensive portfolio of tools used in print, digital, and video content creation. The 2021 launch of Adobe Express broadened the company’s funnel, as it incorporates popular features of the full Creative Cloud but comes in lower-cost and free versions. The 2023 introduction of Firefly marks an important artificial intelligence solution that should maintain the competitiveness of Adobe’s creativity platform. We think Adobe is properly focusing on product-led user growth, and we believe that upselling these users will become more important over time.

Adobe benefits from the natural cross-selling opportunity from Creative Cloud to the business and operational aspects of marketing and advertising. The company’s Experience Platform provides analytics and media optimization for brand assets produced in Creative Cloud, which deepens the wallet share within the same marketing organization.

Document Cloud is driven by one of Adobe’s best-known products, Acrobat, and the ubiquitous PDF file format created by the company. It now brings in billions of dollars in recurring revenue annually. The rise of smartphones and tablets, coupled with bring-your-own-device and a mobile workforce, has made a file format that is usable on any screen more relevant than ever.

Adobe is introducing and leveraging features across its various cloud offerings to drive a more cohesive experience, win new clients, upsell users to higher-priced solutions, and cross-sell digital media offerings. We expect M&A will continue to bolster all aspects of Adobe’s portfolio as the company defends against emerging competitors.

Read more about Adobe here.

Baidu BIDU

• Morningstar Rating: 4 Stars
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High
• Industry: Internet Content & Information

Baidu’s main businesses include online marketing services from its search engine, AI cloud infrastructure, AI applications, AI marketing, and autonomous driving. This undervalued AI stock is trading 32% below our fair value estimate of $113.

Baidu’s traditional search business faces significant long-term challenges from fast-growing internet and large language model competitors, including Alibaba, ByteDance, Tencent, and DeepSeek. As a result, Baidu is increasingly shifting its focus toward its AI-powered businesses, which accounted for 35% of total revenue in the fourth quarter of 2025.

Baidu’s full-stack artificial intelligence capabilities include its Kunlun AI chips, cloud services, the PaddlePaddle deep-learning framework, its self-developed ERNIE foundation models, and a range of AI applications. We believe Baidu is an early mover and is well-positioned to benefit from China’s AI development. However, whether Baidu can secure long-term leadership will largely depend on execution, especially as other resource-rich companies like Alibaba and ByteDance also possess strong competitive capabilities and offerings.

Baidu ranks number one globally in robotaxi order volume as of the fourth quarter of 2025, operating in 26 cities worldwide. Despite management highlighting a potential total addressable market for autonomous driving that is 9times that of its online advertising segment, commercial success remains highly uncertain. Revenue contribution remains immaterial, and both mass-scale adoption and time-to-market remain unclear.

Its streaming video platform, iQiyi, continues to weigh on the company’s margin due to high content costs. The business must constantly develop or acquire new content to prevent customer churn. We are cautious about its outlook, given strict government regulation of broadcast content and the abundance of competing and substitute online entertainment options.

Read more about Baidu here.

CoreWeave CRWV

• Morningstar Rating: 5 Stars
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High
• Industry: Software - Infrastructure

This edition of the best AI stocks to buy now closes with CoreWeave. CoreWeave is a modern cloud infrastructure company that offers Nvidia GPUs and other essential AI hardware with optimized efficiency to handle AI training and inference workloads. Shares of CoreWeave look 50% undervalued relative to our $108 fair value estimate.

CoreWeave is a leading neocloud that provides GPU compute for artificial intelligence workloads. As a forerunner in the space, it can offer the best-in-class customer experience and is the only AI cloud that has ever earned a Platinum rating in Semianalysis’ ClusterMAX scoring system. We attribute CoreWeave’s superior user experience to its deep integration of Nvidia technology and AI-optimized tech stack design. Going forward, we believe CoreWeave can continue to benefit from its close relationship with Nvidia and offer better availability of Nvidia’s latest GPUs as well as networking equipment. We expect CoreWeave to keep its computing efficiency edge on the bare metal level against much larger, established cloud service providers, including AWS, Azure, and Google Cloud.

A large chunk of CoreWeave’s bookings comes from industry giants such as Microsoft, OpenAI, Meta, and Nvidia. These customers usually make four- to six-year commitments on a take-or-pay basis, where CoreWeave receives payments regardless of the client’s actual capacity utilization. The take-or-pay arrangement grants CoreWeave access to asset-level lines of credit in the form of delayed draw term loans. Ideally, CoreWeave should receive enough cash to pay back these loans’ principal in around two years. We believe CoreWeave will continue to aggressively use delayed draw term loans to finance its future GPU purchases. The company also needs to utilize other financing vehicles, such as corporate bonds and convertible notes, to support its day-to-day operations.

CoreWeave generally asks customers to make 15%-25% of prepayments at contract initiation, and then it uses the proceeds to purchase GPUs and other infrastructure for service delivery. Such arrangements can mitigate the risk where CoreWeave commits to expand its capacity at a massive scale and GPU demand falls short, since CoreWeave is only making investments based on demand that has already materialized. Given that leading AI firms seem to be in a perpetual search for more cloud capacity, we think the prepayments will continue to exist over the next few years and alleviate CoreWeave’s investment pressure.

Read more about CoreWeave here.

What Is the Morningstar Global Next Generation Artificial Intelligence Index?

The Morningstar Global Next Generation Artificial Intelligence Index provides exposure to leading-edge AI technologies, including generative AI and adjacent products and services.

The index derives its constituents from the Morningstar Global Markets Index, which represents 97% of the investable market capitalization of developed and emerging markets globally. Companies must be covered by Morningstar’s equity research analysts and have a score of 1 or higher for at least one of the defined subthemes to be eligible for index inclusion.

The four subthemes, as identified by the Morningstar Equity Research Next Generation Artificial Intelligence Committee, are:

Generative AI: This involves the creation of original content. Large language models, such as ChatGPT, are a type of generative AI model that focuses on producing humanlike text.

AI Data and Infrastructure: This encompasses the various technological components needed to manufacture, design, maintain, host, support, and improve AI models. These include semiconductors and data center infrastructure.

AI Software: This includes enterprise and consumer software that incorporates AI models to enhance the user experience and/or improve efficiency.

AI Services: This includes consultancies and outsourced business process companies, which may aid businesses in implementing AI.

Through a standardized scoring process conducted by Morningstar equity analysts, companies are assigned thematic exposure scores for each subtheme. Companies ranked in the top 50 are eligible for inclusion. The index constituents are weighted by float-adjusted market cap. However, the weightings are adjusted, if necessary, to ensure at least 80% of the index is allocated to stocks with meaningful exposure to generative AI. The index is rebalanced quarterly and reconstituted annually.

Investors who would like to extend their search for the top AI stocks can do the following:

• Review the holdings of the Morningstar Global Next Generation Artificial Intelligence Index to investigate further.
• Explore the pointers in Morningstar’s Guide to Investing in Stocks to develop and improve your stock-picking strategies.
• Stay up to date on the tech sector’s performance, key earnings reports, and more with Morningstar’s technology sector page.
• Use the Morningstar Investor screener to build a short list of AI stocks to research and watch.