The AI boom is turning four, making now a good time to reevaluate where it stands. The starting point: the worries. The rapid rise in AI and AI-adjacent stocks over the past several years has sparked widespread concern about the possibility of a tech bubble.
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The team at UBS, however, believes that with continued strong demand for AI, a broadening set of AI-related investment opportunities, and still-significant return potential, the sector’s story remains intact. The bank recommends that investors start buying into the application layer as a way to diversify exposure.
Summing up the UBS stance, Ulrike Hoffmann-Burchardi, Chief Investment Officer, writes: “While we expect global AI capex to continue to rise over the coming years, we do not see evidence of an investment bubble. In fact, we have said that the race to artificial general intelligence could trigger a capex cycle where the capex of the enabling layer is dissociated from the near-term monetization potential of the application layer. And this pattern is consistent with previous innovation cycles… So, we believe the AI story remains intact, and expect a more widespread capture of AI value creation to support a broadening of leadership in equity markets.”
This stance lends support to UBS’s stock analysts as they begin picking out AI stocks to buy in 2026 – and at least one of their choices is probably a stock you’ve never heard of. So, let’s dig into their choices and see what other analysts think, using TipRanks data.
Microsoft Corporation (MSFT)
First up is Microsoft, a name that everyone knows. The company is a world leader in software, and has also staked out a powerful position in the fields of cloud computing and AI. Microsoft’s leadership in these areas are key points for investors; both are leading the tech sector in the coming years.
Both Cloud and AI have been big revenue drivers for Microsoft in recent quarters, fitting since the company was an early backer of the generative AI explosion. Microsoft invested $13.8 billion in OpenAI, the company behind ChatGPT, in recent years; and early this year, the tech giant revealed the new terms of that partnership. Microsoft now has a 27% stake in OpenAI, and the AI firm has committed to purchasing $250 billion worth of Microsoft Azure’s cloud computing services. The deal marks a huge return for Microsoft’s original investment in OpenAI.
This simply underscores Microsoft’s commitment to expanding Azure and its related AI tech and services. The company has invested billions in expanding its data center footprint, and has plans to make large capital investments in data centers over the next two years, to double its footprint in this area.
When we look at Microsoft’s financial results, we find that the company is on sound footing to pursue an aggressive cap-ex agenda. Revenue in the last reported quarter, fiscal 1Q26, came to $77.7 billion, a figure that beat the forecast by nearly $2.3 billion and was up 18% year-over-year. The bottom line, reported as a non-GAAP EPS of $4.13, marked a 47-cent per share beat compared to the pre-release estimates.
On the cloud front, Microsoft’s overall cloud revenue was up 26% in fiscal Q1, while Azure and other cloud services revenue climbed 40% (39% in constant currency).
UBS analyst Karl Kierstead covers Microsoft, and takes an upbeat stance, basing it on the strength of the company’s growth in Azure and AI. He writes, “We remain BUY-rated on the stock, partly on the prospect of healthy Azure revs growth in CY26 as new AI capacity comes on-line… Microsoft shares trade at CY26E multiples of 42x FCF, 28x GAAP EPS and 25x non-GAAP EPS. If Azure can sustain high-30%/low-40% growth (perhaps more as capacity comes on-line) and non-GAAP EPS growth remains in the 20-25% range, then the valuation multiples appear compelling.”
The stated Buy rating is accompanied by a $650 price target that implies a 36% gain in the next 12 months. (To watch Keirstead’s track record, click here)
The 34 recent analyst reviews here feature a lopsided 32 to 2 split that favors Buy over Hold – for a Strong Buy consensus rating. The stock is priced at $477.18, and its $631.36 average price target implies a 32% gain over the next year. (See MSFT stock forecast)
Waystar Holding (WAY)
Next up is the stock you probably haven’t heard of: Waystar Holding. Waystar is an AI technology company working in the healthcare industry, where it provides a platform that allows providers to streamline and simplify their payment procedures – and in doing so, to focus more of their attention on the patient care that really matters.
Waystar’s AI-powered platform offers a wide range of solutions, from financial clearing to claim and payer management to denial prevention to analytics and reporting. In short, it covers all of the main functions that medical billers handle – and it covers them using AI to manage the revenue cycle with clarity and precision.
The numbers tell the tale: nearly 50% of the US population has its healthcare billing matters handled through Waystar, to the tune of 6 billion-plus annual healthcare payment transactions. The company works with more than 1 million providers, making it a major player in the medical billing scene.
In July, Waystar announced its plans to acquire Iodine Software, a provider of AI-powered clinical intelligence systems. The acquisition, valued at $1.25 billion, was closed in October.
The company’s last reported financial results covered 3Q25. In that period, Waystar had revenues of $268.7 million, a figure that was up 12% year-over-year and beat the forecast by $11.9 million. At its bottom line, Wayfair realized a non-GAAP EPS of 37 cents, which was 2 cents per share better than had been expected.
The UBS view on Waystar is laid out by analyst Kevin Caliendo, who sets up clear expectations for continued success. Caliendo writes, “Waystar offers investors exposure to AI within healthcare, but its stock performance is less correlated with major AI & healthcare sector stocks. In our view, WAY shares offers a differentiated way to participate in AI’s growth within healthcare… Based on our analysis of WAY’s results and competitive positioning, its acquisition of Iodine, and the accelerating adoption of AI in RCM, we expect LDD topline and low-to mid-teens EBITDA growth, with our adjusted EBITDA estimates 3-4% ahead of consensus. Our numbers may prove conservative if cross-sell into new customers (won from Change or elsewhere) accelerates, or the company completes more M&A. We expect earnings over the coming quarters along with the FY26 guide to serve as a catalyst to drive a re-rating…”
The UBS analyst rates WAY shares as a Buy, and he gives them a $41 price target that suggests an upside potential of 30% on the one-year horizon.(To watch Caliendo’s track record, click here)
Waystar has earned a Strong Buy from the Wall Street analyst consensus, based on 17 reviews with a 16 to 1 split that favors Buy over Hold. The stock is priced at $31.59 and its $47.44 average target price indicates room for a 12-month gain of 50%. (See WAY stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.