The New AI Revolution Is Here: Buy These 3 Stocks Before They Surge

Looking downstream beyond artificial intelligence (AI) chips like those Nvidia provides can reveal investment opportunities that most investors are overlooking. Software, physical AI, and memory storage are three verticals that remain underrated, even among investors monitoring those industries.

As the AI revolution expands beyond chips, these three AI stocks are set to benefit. They have all surged over the past year, but future rallies are highly probable and could reward new shareholders.

Image source: Getty Images.

1. Palantir

Palantir (NASDAQ: PLTR) has been on a tear since 2023, but its momentum has slowed down considerably. The AI software stock is down by more than 20% year to date.

Its Artificial Intelligence Platform helps businesses and governments create and use large language models and machine learning models in their operations. Those same customers can also create internal AI agents that are less susceptible to cyberattacks.

These capabilities are already vital for the governments and enterprise customers that use Palantir, and the AIP will continue to gain market share as more companies need AI software infrastructure.

Palantir is still growing rapidly. Its revenue surged 85% year over year, with U.S. revenue more than doubling in the first quarter. More than 200 new customers have agreed to contracts exceeding $1 million in value, with 47 deals exceeding $10 million in that quarter.

Part of the reason Palantir has lost value is that investors worried that Anthropic's Claude model would make software companies obsolete. Most software stocks entered deep corrections as investors saw how quickly Claude can create software out of thin air, but the worries are overblown. Software companies are still retaining existing customers while attracting new ones. Palantir's Q2 results should throw cold water on the SaaSpocalypse thesis and could spark a rally.

2. Alphabet

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is another winner on the software angle. Gemini Enterprise saw 40% sequential growth in paid monthly active users. It seems like a distant memory when people thought ChatGPT would dethrone Google and make it obsolete, just as the SaaSpocalypse fears will be in a few years.

That was part of a quarter that saw 22% year-over-year revenue growth when every part of Alphabet's business accelerated. Google Cloud was the biggest winner, with 63% year-over-year revenue growth and a backlog that nearly doubled sequentially. That backlog offers meaningful revenue visibility for future quarters, which could help the stock surge past new all-time highs.

Online advertising and cloud computing are enough to make Alphabet a compelling stock at a price-to-earnings (P/E) ratio of 27. However, investors may still be underrating how quickly Waymo, Alphabet's self-driving vehicle business, is growing. Waymo now exceeds 500,000 fully autonomous rides per week, and could make self-driving technology mainstream.

It's a big step since Waymo's first fully autonomous ride took place in 2015 and launched public rider-only services in San Francisco in 2022. Waymo is just starting to expand into cities across the U.S., and as more people come to trust autonomous vehicles, they will become more common. Alphabet's market share and profits from autonomous vehicles could grow significantly over the next decade, and most investors aren't considering this possibility.

3. Sandisk

It's really hard to say that a growth stock is about to surge after it gained almost 4,000% over the past year. Sandisk (NASDAQ: SNDK) is one of the few growth stocks that could have another meaningful rally ahead after posting substantial recent gains.

Sandisk is on a generational run as its NAND flash chips have become critical parts of the AI infrastructure build-out. While other companies have benefited by positioning themselves within the AI bottleneck, almost no other company has Sandisk's fundamental strength.

Revenue almost doubled sequentially in the company's fiscal 2026 third quarter. That success led to sales surging 251% year over year. It also comes at a time when Sandisk will start securing multi-year deals with customers to provide more revenue visibility and minimize exposure to cyclicality.

Sandisk anticipates $8 billion in revenue when it reports fiscal 2026 fourth-quarter results. That represents more than 33% sequential growth from the $5.95 billion Sandisk reported in the most recent quarter. However, Micron's more recent earnings results indicate that Sandisk could crush its guidance.

Micron delivered $41.86 billion in its fiscal 2026 third quarter and had previously told investors to expect $33.5 billion at the midpoint. It was a 25% outperformance compared to the midpoint.

Sandisk and Micron are benefiting from very similar tailwinds, but Sandisk has achieved higher growth rates in recent quarters. Micron's earnings are a tip-off that Sandisk's earnings results should be stellar.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Micron Technology, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.