Artificial intelligence (AI) stocks have been incredibly lucrative over the past few years, and many investors who bought in early have experienced life-changing gains. Nvidia alone has earned total returns of around 1,330% over the past five years, as of this writing, transforming $1,000 into more than $14,000 in that time.
However, with the industry experiencing such rapid growth in a short period, some investors are concerned that we're in a bubble that's about to burst.
To be clear, nobody can predict what any industry will do in the short term. However, in The Motley Fool's 2026 AI Investor Outlook Report, experts offer some guidance on how investors might handle this uncertainty.
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Is it safe to invest in AI in 2026?
Even the experts can't say whether an AI bubble is coming in 2026. That said, they emphasize that keeping a long-term outlook can help mitigate risk while still capitalizing on AI's lucrative earning potential.
"AI is a generational investment opportunity," said Asit Sharma, an AI stock analyst at The Motley Fool. "Consistent investing in quality leaders helps you ride out short-term volatility and capture long-term gains."
Donato Riccio, head of AI at The Motley Fool, added that speculation around a potential bubble shouldn't overshadow AI's long-term potential.
"The honest answer is nobody knows," he said about the chances of a bubble bursting. "What we do know is that progress shows no signs of stopping. Even if capability gains moderate from their current breakneck speed, we've already unlocked enough transformative applications to fuel a decade of enterprise value creation."
What should investors do right now?
If market volatility is on the horizon, perhaps the best thing investors can do is seek out quality companies and take advantage of dollar-cost averaging.
Dollar-cost averaging involves investing set amounts at regular intervals throughout the year, which can help limit the impact of price fluctuations. Sometimes you'll end up buying at record-high prices. Other times, you might snag stocks at deep discounts. Over many years, those highs and lows can balance each other out.
"Consistent, rational buying will help most investors tap into the industry's long-term potential while maintaining the peace of mind that comes from a strategic or even opportunistic approach to volatility," Sharma said. In other words, the more consistently you invest, the less you'll need to worry about a potential bubble wreaking havoc on your portfolio.
The key to surviving AI volatility
Short-term volatility is highly likely in an industry that's still finding its footing. In addition to investing consistently, it's equally important to focus on companies with solid fundamentals -- like healthy finances, a competitive advantage, and a capable leadership team to guide the organization through rough patches.
Many companies -- even weak ones -- can see their stock prices soar when AI is thriving and investors are keen to take advantage of the hype. But if a bubble burst happens, weaker companies are more likely to crash and then struggle to recover.
While there are many strong companies out there, Sharma recommends focusing on organizations creating the building blocks of AI technology.
"For the biggest opportunities, look to smaller semiconductor and data center ecosystem players, such as data interconnect specialists, high-bandwidth memory providers, and cutting-edge data storage designers," he said. "The 'best of breed' in these categories will likely outpace the market in the next three to five years."
Riccio added that the investors with the most to gain are the ones willing to stay in the market for the long haul. "For investors willing to weather near-term volatility, the AI transformation represents a once-in-a-generation opportunity to participate in technology that's restructuring how the world works."
