Is It Really Safe to Invest in AI Stocks and ETFs Right Now? Here’s What the Experts Say.
Artificial intelligence (AI) stocks have been the driving force in the market over the last several years, but this summer, these names have started to come under some pressure. While there have been murmurs of an AI bubble, the vast majority of stocks in the sector trade at reasonable, if not downright cheap, valuations, unlike the sky-high multiples seen during the internet bubble.
The biggest fear, though, is a slowdown in AI infrastructure spending. Hyperscalers (owners of large data centers) are pouring unprecedented amounts of money into building out AI data centers, so anytime there is even a faint signal that this spending could slow, the stocks see some selling pressure.
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One recent example is Meta Platforms (NASDAQ: META) revealing that it could launch a cloud computing offering with some of its extra capacity. The fear is that the company already has excess capacity. Meta CEO Mark Zuckerberg offered some assurances by noting that computing demand is so strong that the economics of providing this computing power to third parties can be more attractive than for internal projects.
Image source: Getty Images.
Perhaps one of the most important endorsements that the AI infrastructure boom has legs comes from Taiwan Semiconductor Manufacturing (NYSE: TSM) CEO C.C. Wei. The foundry upped its 2026 capital expenditures (capex) to between $52 billion and $56 billion this year to support the growth of AI chips, and Wei did not make this decision without a lot of due diligence, not only talking to his own customers, but also his customers’ clients. Underutilized fabs (chip manufacturing facilities) can wreak havoc on a foundry’s gross margin and profits, so this is not a decision taken lightly, and Wei had the confidence to push forward.
Meanwhile, Citigroup analysts recently said they expect AI data center capex to grow by another 40% to 50% next year, bringing it to around $1.5 trillion. Analyst Vivek Arya said this growth was supported by a combination of AI agent adoption, token growth, and current market supply constraints.
Should you own AI stocks and ETFs?
According to a Motley Fool survey done before the start of the year, 90% of investors polled planned to hold or buy more AI stocks this year, and only 7% planned to decrease their exposure. There is a good chance you own some AI stocks right now, even if it is through an S&P 500 exchange-traded fund like the Vanguard S&P 500 ETF (NYSEMKT: VOO). The group has done so well over the past few years that AI stocks dominate even these broad-based indexes.
The key is to view these stocks and ETFs as long-term investments, and invest in ones with solid fundamentals and reasonable valuations. Let’s look at some good AI investment options that fit this bill.
If you don’t want to invest in individual stocks, one of the best ways to gain AI exposure is through the Invesco QQQ Trust (NASDAQ: QQQ), an ETF that tracks the Nasdaq-100 index. Tech stocks make up nearly 70% of the ETF’s holdings, and its top 10 holdings are largely in companies that have been leading the AI charge.
For individual stocks, you can stick to market leaders. Nvidia (NASDAQ: NVDA) remains the king of AI and trades at an attractive valuation, while Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) is the most complete AI player, having both its own chips and a world-class AI model. Meta Platforms’ stock is cheap, and it has been one of the best companies at applying AI to its core business to drive strong growth. Advanced Micro Devices (NASDAQ: AMD) is set to see huge growth from inference and agentic AI, while Broadcom (NASDAQ: AVGO) is riding the wave of hyperscalers turning to it to help them design custom AI chips. TSMC is also another great option, as it has a virtual monopoly on AI chip manufacturing, giving it strong pricing power. These are all great AI stocks to own for the long term.
That said, investors also shouldn’t put all their eggs in one basket and generally should try to keep a diversified portfolio, even if it leans more into tech and AI stocks. That’s why I also recommend an ETF like the Vanguard S&P 500 ETF to be a core holding that investors can consistently dollar-cost average into to build wealth over time.
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Citigroup is an advertising partner of Motley Fool Money. Geoffrey Seiler has positions in Advanced Micro Devices, Alphabet, Broadcom, Invesco QQQ Trust, Meta Platforms, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Broadcom, Meta Platforms, Nvidia, Taiwan Semiconductor Manufacturing, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
