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Nvidia (NASDAQ:NVDA), soaring more than 900% over the past five years, clearly has been an excellent choice for investors aiming to win in the artificial intelligence (AI) boom. This tech giant is an obvious stock to select, considering its dominant position in the AI chip space. Nvidia makes the world's fastest graphics processing units (GPUs), the chips powering essential AI tasks such as the training and inference of models.
All of this has led to earnings growth investors can count on quarter after quarter, and this has prompted them to snap up shares of this AI giant. Nvidia, however, isn't alone in this space, and competition is heating up. In fact, one young player has even said that its processors are faster than today's GPUs. Considering this, is Nvidia still the best AI stock to buy in 2026, or is this challenger? Let's find out.
Missed AI's "Act 1"? Act 2 Could Be 14x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we're only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
Nvidia, a company that mainly served the video gaming market in its earlier days, decided to focus on AI about a decade ago. This wise decision allowed Nvidia to perfect its technology and build important relationships in the industry. As the AI story gained traction, the company's commitment to innovation kept it ahead of rivals -- and this remains the case today.
All of this has translated into mind-blowing earnings growth. In the latest quarter, Nvidia delivered triple-digit increases in revenue and profit and, for the first time, offered revenue guidance for the year to come. The company expects a 70% increase in revenue in the next fiscal year and said it was able to predict this due to improving visibility. All of this offers us reason to be optimistic about Nvidia.
Meanwhile, the stock is trading at only 24x forward earnings estimates, which is pretty low for such a well-established market leader with strong growth potential.
All of this supports the idea of more gains ahead for Nvidia, making it a compelling buy right now.
This Nvidia challenger is a company that completed its initial public offering a few months ago. I'm talking about Cerebras Systems (NASDAQ:CBRS), designer of a new type of chip called the Wafer-Scale Engine (WSE). Cerebras takes an approach that's different from that of Nvidia and other rivals. The company has designed a giant chip, one that is 58 times bigger than the Nvidia B200, and this size is what makes the chip amazingly fast.
Cerebras' WSE brings an enormous amount of compute and memory onto one chip. "Our solutions are built for speed," the company wrote in its prospectus. In inference, the WSE has generated answers up to 15 times faster than GPU solutions, Cerebras says.
Customers may come directly to Cerebras for on-premises deployment or for use through the Cerebras cloud, or they may access the WSE systems through major cloud providers like Amazon's Amazon Web Services (AWS).
Though Cerebras' revenue levels are far from those of Nvidia, the company is seeing tremendous demand and growth. In the latest quarter, cloud and other services revenue jumped 281% to $126 million.
Meanwhile, the stock, which surged 68% on its first day of trading, has struggled since that time. Today, it's down 58% from its opening price of $350, offering an interesting entry point for investors looking for the next potential AI winner.
Considering both stories, is Nvidia still the best buy in 2026? Or should investors go for this challenger? Cerebras' future looks promising, and today it trades below its $185 initial public offering price and well below its opening price. This represents an opportunity for aggressive investors, and if you fall into that category, you might consider picking up a few shares.
But for most investors, Nvidia still is the better buy. This is because Nvidia offers you the strength of a well-established, profitable company and has built a true AI empire that likely could withstand potential short-term headwinds. At the same time, Nvidia is well-positioned to benefit from new waves of AI growth in the coming years, and today, the stock is trading at a very reasonable price. All of that makes Nvidia a top AI stock to buy in 2026.
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Is Nvidia Still the Best AI Stock to Buy in 2026, or Is This Challenger? was originally published by The Motley Fool
