AI Hot Potato Is Meta’s for Now, But Chip Stocks Are the Winners

Wall Street pros say chipmakers remain the best way for equity investors to play the race for the top artificial intelligence agent even as Meta Platforms Inc.’s Muse seems to have seized the baton.

“Leadership is almost like a game of hot potato,” said Paisley Nardini, who helps oversee $3.8 billion as head of investment strategy at Tema ETFs, which owns Meta shares. “I’m already hearing people joke about how we’ll forget about Muse for something else in a couple weeks.”

AI agents handle multi-step tasks like making reservations or managing finances. Their popularity has created waves in the market as investors weigh which products are likely to emerge as favorites for businesses and consumers — while also assessing the potential disruptive impact they could have on traditional business models.

Amid those questions, however, what’s become clear is that these new agents require more computing power than the previous generation of AI tools, which largely took the form of chatbots. That means there should be continuing demand for the shares of chipmakers and other areas of the AI infrastructure landscape, which have been the favored ways to position for the emerging technology since ChatGPT debuted nearly four years ago.

“Rather than trying to play which company will wind up with the best agent, we want to own the foundation for agents overall, the stocks that will work regardless of which company is in the lead,” said Rick Lear, chief investment officer at Lear Investment Management, whose concentrated portfolio focuses on names it expects to benefit from the rise of agents, such as Nvidia Corp., Micron Technology Inc. and power company Williams Cos Inc.

“Tech leadership keeps going back and forth, but if agents take off overall, we will need a lot more chips, more memory, more power, more infrastructure,” he said. “That will be true universally, regardless of whether we go from Meta being the best to stinking again.”

AI infrastructure stocks have largely driven the market this year. Of the top 10 gainers in the S&P 500 Index, nine have exposure to the theme. Chipmakers have been particularly strong, with the Philadelphia Stock Exchange Semiconductor Index jumping 84%, fueled by AI plays like Micron, Marvell Technology Inc., Intel Corp. and Advanced Micro Devices Inc.

Meta debuted its Muse personal AI assistant last month, and quickly garnered huge download numbers and rave reviews. That contributed to a scorching September for Facebook’s parent, with the stock’s 27% gain representing its best month in nearly four years. OpenAI followed with its own new product, Dots, joining Alphabet Inc.’s Gemini Spark and SpaceXAI’s Grok Bot in the AI agent market.

Read More: Meta’s New Muse AI App Tops Charts, Draws Strong Reviews

Muse’s popularity shows how quickly AI sentiment can change, with momentum often shifting to the latest or buzziest product. While Meta’s riding high now, it struggled in the first half of the year due to the perception that it was spending tens of billions of dollars on AI with little to show for it. Meanwhile, Alphabet has gone from being considered the AI leader earlier in the year to coming under scrutiny more recently.

That kind of whipsaw is why so many investors see AI infrastructure stocks as more reliable wagers than the companies in the agent race.

“If you’re trying to bet on whether Meta, Alphabet, Apple or someone else will be the biggest winner of AI agents, right now that looks like a coin flip,” Tema ETFs’ Nardini said. “Infrastructure is a more straightforward way to reap the benefits, because demand for agents will drive demand for these products over a long-term time horizon.”

This is swiftly becoming a consensus view, prompting analysts to raise their expectations for AI infrastructure earnings. The sector is expected to post net income growth of 63% in 2027 on a 54% leap in revenue, according to Bloomberg Intelligence. At the end of July, the projection was for an increase of less than 48% in profits on a 32% rise in revenue.

Estimates for 2028 have been moving higher as well, a sign that Wall Street expects the trend to be durable over several years.

Constantly evolving agents are a key part of that thesis. Different kinds of semiconductors — including processors, memory and networking chips — could also get a boost from their development, according to Citigroup Inc. analyst Atif Malik. He estimates the total addressable market for CPU chips will grow at a 60% compound annual rate through 2030, according to an Oct. 6 research note.

“That’s why the infrastructure approach makes a lot of sense,” Nardini said. “Meta won’t hold the torch forever. Leadership will change in six months. What won’t change is the demand for chips.”

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Broadcom Inc., fresh off the launch of a $60 billion debt financing to help fund Anthropic PBC’s AI build-out, is already sketching out plans for its next blockbuster deal.Samsung Electronics Co. reported a nearly nine-fold rise in quarterly operating profit, though that was still shy of sky-high expectations elevated by relentless spending on AI infrastructure.Tencent Holdings Ltd. is considering an offshore bond sale of as much as $5 billion, according to people familiar with the matter, adding to the wave of tech companies seeking debt financing as AI needs grow.Taiwan Semiconductor Manufacturing Co. reported a 51% rise in quarterly revenue, a positive signal for investors trying to gauge the sustainability of a global AI infrastructure buildout.

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