Management plans to invest heavily in artificial intelligence this year as well.
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Tech companies have invested heavily in developing artificial intelligence (AI) models and technologies in recent years, effectively turning the field into the latest arms race. The returns from these investments may not always be clear, but no company wants to be seen as falling behind its rivals. As such, spending on AI in general is intensifying as a way for companies to demonstrate to investors that they are committed to AI-related growth initiatives.
That’s the fear anyway. But a report says a slowdown in AI spending and investment won’t necessarily happen immediately. And that could mean some AI stocks may still have room to rise further this year.
68% of executives plan to spend more on AI this year
According to advisory firm Teneo’s annual survey, more than two-thirds (68%) of CEOs not only plan to continue investing in AI this year; more than the previous year. On the other hand, most current AI projects are not even profitable.
This reinforces the idea that management would rather continue investing in AI than stop investing in it and perhaps admit to shareholders that they don’t understand how to generate meaningful returns on AI. Doing so may appear to send a bad message to investors and negatively impact the company’s stock price.
Will AI stocks continue to rise in 2026?
This recent study may be music to Nvidia’s ears (NASDAQ:NVDA) Investors and other big tech companies benefiting from increased AI-related spending. Demand for Nvidia’s AI chips has soared as companies invest in developing AI models, making it the world’s most valuable company with a market capitalization of about $4.6 trillion.
There may be additional growth opportunities related to AI this year, but some or all of that growth may already be priced into the stock’s current valuation. For example, NVIDIA’s forward price/earnings (P/E) ratio is nearly 25 times (based on analyst expectations). This is higher than the S&P 500 average of 22. This may not be an extremely high multiple, but NVIDIA’s valuation does include a premium. And many highly valued AI stocks are expected to benefit from significant AI investment for years to come.
While this research may seem to be good news for AI stocks and suggest that the bubble won’t necessarily burst in 2026, it doesn’t mean AI stocks will skyrocket. As of Monday’s close, Nvidia’s stock price was down 11% from its 52-week high, with investors worried about rising valuations in the tech space.
Should you invest in AI stocks this year?
It may not be too late to invest in AI stocks, as long as they’re not grossly overvalued and have a clear path to further growth. Nvidia is a great example of a company that could continue to perform well in 2026, as chip demand continues and its valuation is reasonable given its growth opportunities.
But for other stocks that trade at much higher premiums and whose growth may be a little more questionable, you might want to avoid them. Investors seem to be increasingly concerned about rising tech company valuations these days, but at least factoring earnings multiples into the decision-making process allows them to base their investment decisions on best-case scenarios without taking on too much risk.
David Jagielski, CPA has no position in any stocks mentioned. The Motley Fool has a position in and recommends Nvidia. The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner providing financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
