1 Wrong Way to Think About the AI Boom Right Now

Technology stocks have been all over the map over the past six months. Some of their volatility is tied to the war in Iran and fears of an economic slowdown if the conflict persists. But some is also tied to investors' fear that the AI boom, particularly in hardware stocks, may have played out.

Recent research from The Motley Fool found that 41% of investors think AI stock prices have reached speculative levels and are likely in a bubble.

I don't disagree that some AI stocks are riding a wave they don't deserve to be on. But that doesn't make all artificial intelligence stocks speculative. And there's solid evidence indicating that spending on the AI hardware boom is still well underway.

Image source: Getty Images.

Being too fearful of the AI boom is the wrong perspective

I understand investors' fears right now. Some investors may be correctly assessing that there are some overvalued stocks that have far more sizzle than steak, and don't want to get burned when those companies don't live up to hype. Other tech investors may be recalling the dot-com boom and bust and worry about staying in too long.

No one wants to be the last one looking for a chair when the music stops.

But investors who believe many AI stocks are just speculative may be overlooking the strong financial performance of great companies. Here are the most-recent financial results of leading AI hardware companies Nvidia (NASDAQ: NVDA), Broadcom (NASDAQ: AVGO), and Taiwan Semiconductor (NYSE: TSM), or TSMC:

• Nvidia's sales rose 73% to $68.1 billion, and non-GAAP (generally accepted accounting principles) earnings per share (EPS) popped 82% to $1.62 in Q4 2026.
• TSMC's earnings increased 35% to $3.14 per American depositary receipt, and revenue jumped 21% to $33.7 billion in Q4 2025.
• Broadcom's sales grew 29% to $19.3 billion, and non-GAAP EPS increased 28% to $2.05 in Q1 2026.

Clearly, these aren't companies whose share prices have climbed on mere speculation. Moreover, each one holds a dominant position in their AI niche.

Nvidia's chip designs hold 86% of the AI data center processor market; TSMC manufactures 70% of the world's processors and an estimated 90% of advanced processors; and Broadcom will hold an estimated 60% of the application-specific integrated circuit (ASIC) market by next year.

So if you're trying to call the end of the AI boom and are avoiding these companies because you're one of the 41% of investors who think AI stocks are too speculative, their lead in AI and their financial performance should make you reconsider.

The latest evidence points to more AI growth

And then there are the massive agreements these companies continue to make that throw cold water on the idea that these stocks are moving simply on speculation.

Broadcom just signed a long-term agreement with Alphabet's Google to design the company's Tensor Processing Units (TPUs) used in its AI data centers through 2031. The deal shows just how integral Broadcom's processors are to advanced AI infrastructure.

And that collaboration is in addition to another agreement Broadcom just signed with Anthropic and Google, in which the company will provide up to 3.5 gigawatts of computer capacity to the AI company. Some analysts estimate Broadcom's revenue from Anthropic could total $63 billion over the next two years alone.

For its part, Nvidia's management says revenue growth will be 77% in the first quarter of fiscal 2027, reaching $78 billion. And large tech companies continue to spend piles of cash on data center deals, like Meta Platforms' recent agreement with Nebius for up to $27 billion for data center computing. Nvidia owns a 5% stake in Nebius and, more importantly, uses Nvidia's processors in its data centers.

TSMC is striking major deals, too. Apple has reportedly already secured more than half of TSMC's 2-nanometer processor capacity for this year. Apple has committed to buying 100 million chips from the new plants this year, and other notable customers are Nvidia, AMD, and Broadcom. TSMC is investing $165 billion to build the new facilities in the U.S., indicating that it sees prolonged demand for its processors and is willing to spend huge sums to meet it.

There's no guarantee that AI infrastructure spending will continue at the same pace, of course, but it's likely premature to call the end of it now. AI spending is still accelerating, and Nvidia, Broadcom, and TSMC are successfully tapping into it.

You can sit out the AI boom if you like, but trying to call the end of it too early looks like a mistake.

Chris Neiger has positions in Apple. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Broadcom, Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing and is short shares of Apple. The Motley Fool has a disclosure policy.