ewsba.se
Written by Trevor Jennewine for The Motley Fool->
Nvidia stock has advanced 15% year to date, but DigitalOcean's share price has more than tripled as the company has pivoted towards AI services.
Nvidia dominates the AI infrastructure market, and its ability to innovate across chips, systems, algorithms, and software is a key competitive advantage.
DigitalOcean recently introduced its AI-Native Cloud, a platform purpose-built to simplify inference and agentic workloads.
Nvidia (NASDAQ: NVDA) remains the center of the artificial intelligence boom, but the stock is up just 15% in 2026, both because investors worry the current pace of AI spending is unsustainable and because they question the durability of Nvidia's dominance in the AI infrastructure market.
Meanwhile, DigitalOcean (NYSE: DOCN) is a little-known cloud computing company whose aggressive expansion into AI services has led to tremendous shareholder returns. The stock is up 240% this year, and most Wall Street analysts say it's still undervalued. The median target price of $177 per share implies 8% upside from its current share price of $164.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Here's what investors should know about these AI stocks.
Nvidia dominates the artificial intelligence infrastructure. The company is best known for its GPUs, chips that accelerate AI workloads, but its greatest competitive strength lies in vertical integration. Nvidia builds rack-scale AI systems comprising chips and networking, and it supplements its hardware with an unmatched software ecosystem of developers.
That full-stack strategy affords Nvidia a durable competitive moat. The company has nearly 90% market share in AI accelerators, and it captures over 40% of AI data center spending. Nvidia may lose some market share in the coming years as custom chips (e.g., Alphabet's TPU) become more popular, but it will almost certainly remain the dominant supplier of AI infrastructure.
"Our pace of innovation, particularly at our scale, is unmatched, fueled by an annual R&D budget approaching $20 billion and our ability to extreme co-design across compute and networking across chips, systems, algorithms, and software," CFO Colette Kress recently told analysts. "We intend to deliver x-factor leaps in performance per watt every generation and extend our leadership position over the long term."
Nvidia has an important catalyst on the horizon in the upcoming launch of its Vera Rubin platform, which brings together Rubin GPUs and Vera CPUs. It works with Groq 3 LPUs (language processing units) to speed up inference tasks. When paired with LPUs, Rubin GPUs deliver up to 35 times more throughput per watt than the previous generation of Blackwell GPUs.
Wall Street estimates Nvidia's adjusted earnings will increase at 53% annually through the fiscal year ending in January 2028. That makes the current valuation of 45 times adjusted earnings look quite reasonable. It's not too late for patient investors to buy Nvidia.
DigitalOcean provides cloud infrastructure and platform services to small and medium-sized businesses, particularly those in the technology sector. Hyperscalers like Amazon and Microsoft undoubtedly have broader portfolios, but their products are built for large customers with complex needs, deep pockets, and large IT departments.
By comparison, DigitalOcean offers fewer and less advanced services, but its platform is designed to simplify cloud computing. Its intuitive user interface with click-and-go options lets developers spin up servers and deploy applications quickly, often in just a few minutes. DigitalOcean also provides no-cost 24/7 technical support to all customers.
The number of inference tokens processed daily is projected to grow over tenfold by 2030, meaning demand for AI infrastructure is expected to increase substantially. DigitalOcean hopes to capitalize on this boom with its AI-Native Cloud, which brings together the servers and software needed for agentic workloads. CEO Paddy Srinivasan called it the "most significant product launch" in company history.
DigitalOcean reported solid first-quarter financial results. Revenue increased 22% to $258 million, driven by exceptionally strong sales growth among AI customers. Non-GAAP net income dropped 21% to $0.44 per diluted share, but that was due to significant spending on AI infrastructure. "We beat every financial target we shared in our last call," Srinivasan told analysts.
DigitalOcean also gave very encouraging guidance, bolstered by what Srinivasan sees as a "generational market opportunity" in AI. The company says revenue growth will hit 26% in 2026, before accelerating to over 50% in 2027. Management previously predicted revenue would grow 30% next year, but the company recently secured 60 megawatts of additional compute capacity that will boost sales.
Wall Street estimates DigitalOcean's adjusted earnings will grow at 23% annually through 2028. That makes the current valuation of 81 times adjusted earnings look expensive. The market is excited by the upward revision to revenue guidance, and the stock has climbed more than 50% since the company reported earnings on May 5. I think investors should wait for a pullback before buying shares, or at least keep any purchases very small.
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $471,827!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,319,291!*
Now, it’s worth noting Stock Advisor’s total average return is 986% — a market-crushing outperformance compared to 207% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of May 11, 2026.
Trevor Jennewine has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, DigitalOcean, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
This data feed is not available at this time.