Just when investors may have gotten a firm grasp on artificial intelligence (AI), the game is changing again. According to Deloitte Global's TMT Predictions 2026 report, inference will account for two-thirds of AI computing in 2026.
Inference marks the next stage of AI adoption. Whereas training AI builds the model's intelligence, inference concerns how the model operates in real-world use cases. A great example would be the recently viral OpenClaw AI agents that are running autonomously on people's computers.
The key difference between AI training and inference is how they compute. While AI inference could shift the priority from maximizing raw computing power to efficiency, there's one important takeaway: The world will likely need more chips, not fewer.
Here are two AI stocks primed to benefit from the inference explosion that's only just getting started.
Image source: Getty Images.
1. Broadcom
Nvidia's GPU chips have always been excellent for heavy workloads, making them ideal for training AI models. That's why Nvidia has dominated the data center AI chip market since early 2023. But Broadcom (AVGO 1.63%) is emerging as a legitimate challenger to the GPU king. Broadcom has long specialized in networking chips. In an AI data center, they help GPU clusters communicate and process information quickly.
However, Broadcom has branched out and begun designing application-specific integrated circuits (ASICs) for companies such as Alphabet and Anthropic. These AI hyperscalers are among Nvidia's largest customers. A custom chip built for a specific task can be more efficient than even a high-end general-purpose chip. Realistically, the AI chip market is already massive and still growing, so it's not like Broadcom will take Nvidia's lunch money. It does open doors for Broadcom, though.
NASDAQ: AVGO
Key Data Points
Broadcom certainly isn't cheap at 70 times earnings. That said, the company's success with custom chips has drastically lifted long-term growth estimates over the past year. Analysts now see Broadcom growing earnings at an annualized rate of more than 30% moving forward, which can justify buying and holding the stock at these levels. Consider nibbling on shares and saving some cash to buy any dips. Broadcom is poised to emerge as a big winner in AI inference.
2. Arm Holdings
At the core of AI chips and the broader chip space sits Arm Holdings (ARM 4.15%). The company licenses its instruction set architecture to companies for central processing units (CPUs) and other microchips. You could think of it as the language a chip speaks. No matter which company created the chip or what it does, it listens, speaks, and acts in that language. Arm owns some industries, such as smartphones, and is picking up share in others.
Arm's market share is racing toward 50% in data centers, where the top hyperscalers, including Amazon, Alphabet, Meta Platforms, and Microsoft, all use Arm-based server chips. Arm also sees AI inference as a tremendous opportunity. Inference requires steady, efficient computing, which CPUs excel at. A GPU chip is like an exotic sports car: great for going really fast, but it's not as practical as a daily driver. In just the past several years, Arm has increased its global market share from 44% to 50%.
NASDAQ: ARM
Key Data Points
Value-conscious investors may cringe at the stock's price-to-earnings ratio of 172. Its hefty price tag reflects the company's wide competitive moat, jaw-dropping 94.8% gross margins, and long-term growth opportunities. Analysts expect Arm's earnings to grow by more than 32% annually over the long term. That may not be enough to buoy Arm stock if adversity or broader market turbulence strikes. As with Broadcom, it's likely wise to keep a bit of cash on hand for any better buying opportunities. Arm is a top-notch stock that will rarely come cheap, making any dips all the more compelling.
