Artificial intelligence (AI) stocks have recently faced market volatility due to various external factors, including geopolitical events, concerns about an AI bubble, and recession fears. However, underlying demand for AI hardware and software remains robust, indicating that this sector is poised for a strong recovery by the end of 2026. Enterprises are increasingly adopting AI for productivity gains, leading to surging demand for AI software and hardware. Companies like Palantir Technologies, an AI software specialist, and Intel, a semiconductor giant, are well-positioned to benefit from this enduring trend. This article predicts these two AI stocks will finish 2026 higher than where they started, outlining the fundamental reasons behind their potential growth.
Intel: A favorable demand-supply environment should pave the way for better-than-expected growth
Intel's stock has already demonstrated impressive growth in 2026, soaring 67% despite market fluctuations. This surge is largely attributed to its progress in the AI data center sector, where demand for its custom processors and server Central Processing Units (CPUs) is remarkably high, often exceeding current supply capabilities. Hyperscalers are actively pursuing long-term agreements with Intel to secure necessary CPU supplies, hinting at potential price increases and further revenue growth. Intel's custom AI processor business, focusing on Application-Specific Integrated Circuits (ASICs), reported a significant 50% year-over-year increase in the fourth quarter, achieving an impressive annualized run rate of $1 billion in revenue. With ongoing efforts to enhance production yields and bring additional capacity online, Intel is well-positioned to capitalize on this robust demand. Analysts predict Intel's earnings per share could jump 15% to $0.48 in 2026, and continued healthy growth is expected in the subsequent years, making a strong case for its stock to climb higher in the long run.
Palantir: Helping customers put AI into action
Palantir Technologies is emerging as a critical partner for both enterprises and governments seeking to deploy AI solutions effectively. Its Artificial Intelligence Platform (AIP) is driving substantial productivity enhancements and cost efficiencies for customers. For example, General Mills has reported daily savings of $40,000 by utilizing Palantir's generative AI software. This success has fueled rapid expansion of Palantir's customer base, which grew by 34% year-over-year in Q4 2025. Furthermore, existing customers are increasing their spending, reflected in an impressive 139% net dollar retention rate, a 19-percentage-point increase from the prior year. This strong customer momentum led Palantir to secure a record $4.3 billion in new contracts in the last reported quarter, marking a 138% year-over-year increase, significantly outpacing its overall 70% revenue jump to $1.4 billion. While Palantir's stock has seen a 27% decline this year and carries high valuation multiples (a forward earnings multiple of 107 and a sales multiple of 81), its accelerating customer acquisition and revenue growth could enable it to justify these valuations and regain upward momentum, leading to strong gains by the end of 2026.
