The Artificial Intelligence (AI) Stock That's Quietly Outperforming Nvidia in 2026

Nvidia has had a tough time on the stock market so far in 2026, with its shares trading roughly flat as of this writing. What's surprising is that investor sentiment around the stock has been negative even though it recently reported terrific results in its latest quarter.

Nvidia's position as the world's largest company, along with the growing competition from other chipmakers such as Broadcom, and persistent concerns about an AI bubble, are the probable reasons behind its poor stock market performance this year. However, the same cannot be said of Ciena (NYSE: CIEN), a networking company that has outperformed Nvidia stock impressively so far in 2026.

Let's see why that has been the case and whether Ciena can deliver more upside for investors.

Image source: Nvidia.

AI-powered networking demand has been a boon for Ciena

The latest news surrounding Ciena stock isn't very positive. It lost nearly 13% of its value after releasing its fiscal 2026 first-quarter results (for the quarter ended Jan. 31, 2026) on March 5. It's worth noting that Ciena stock is up by 20% this year despite the sharp pullback. More importantly, the latest pullback is an opportunity for savvy investors to buy a top growth stock.

That's because Ciena's business is growing at a red-hot pace, primarily driven by the booming demand for its optical networking components that enable fast data transmission in AI data centers. The company's fiscal Q1 revenue rose 33% year over year to $1.43 billion. Its earnings growth was even more impressive, as its bottom line jumped by 111% to $1.35 per share.

Even better, Ciena raised its full-year revenue guidance and now expects a 28% increase in its top line in fiscal 2026, up from the earlier expectation of 23% growth. Don't be surprised to see Ciena's outlook improving as the year progresses, as it received $2 billion worth of new orders last quarter, taking its total order backlog to $7 billion.

Importantly, Ciena management points out that it is now taking orders that will be fulfilled in fiscal 2027. So, there is a good chance that the company's growth will exceed expectations in 2026, followed by another terrific performance in the next fiscal year.

It is also worth noting that Ciena has increased its gross margin guidance for fiscal 2026 by 1 point to a range of 43.5% to 44.5%. The company attributes this potential margin improvement to its market share gains in AI-fueled connectivity applications, which have strengthened its pricing power.

Here's why the stock is a no-brainer buy right now

Investors were probably expecting a bigger guidance bump from Ciena, especially considering that it is trading at an expensive 187 times trailing earnings and 68 times forward earnings. However, they seem to be missing the point that the company's networking components are used by three major hyperscalers in the U.S., as well as by emerging hyperscalers.

So, the company will be a direct beneficiary of the significant investments in AI data centers this year. Also, Ciena's growth justifies its valuation. Analysts are expecting a 132% increase in earnings this fiscal year to $6.13 per share. Don't be surprised to see its terrific earnings growth continue in the future as well, owing to its sizable backlog, partnerships with key AI infrastructure players, and the continued investments in data center infrastructure to support AI applications.

As such, buying this AI stock after its latest drop could be a smart long-term move.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ciena and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.