4 AI Stocks Are Joining the S&P 500: Buy, Hold, or Pass?

4 AI Stocks Are Joining the S&P 500: Buy, Hold, or Pass?

Geoffrey Seiler, The Motley Fool

Wed, September 9, 2026 at 6:03 PM GMT+3 4 min read

The S&P 500 index is already a bit tech-heavy, with over a third of its constituents in the sector, but it's about to see that number pushed higher with four new AI stocks set to be added to the index later this month. Let's take a look at the S&P's newest members and whether investors should buy, hold, or pass on these stocks.

Sandisk

One of the best-performing stocks in the market this year, Sandisk (NASDAQ: SNDK) has been riding the memory supercycle to huge revenue growth and a robust gross margin. The company is a pure-play NAND (flash) memory maker and has benefited from the current supply-demand imbalance in the industry.

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NAND supply remains constrained as the big three memory makers continue to put most of their efforts and resources into DRAM (dynamic random access memory) and specifically high bandwidth memory (HBM). At the same time, demand for flash continues to soar from the need for massive solid-state drives (SSDs) that store training data.

Sandisk has started to lock up customers with long-term deals for the first time ever, and AI seems to have potentially brought with it a structural shift where the typical boom-bust cycles are no longer the norm. Trading at a forward P/E of 5, the stock looks like a solid hold, with the NAND cycle looking like it will last longer than most expect.

Palo Alto Networks

After Anthropic's Mythos model revealed extensive previously unknown software vulnerabilities, the importance of cybersecurity in the AI era took center stage. Palo Alto Networks (NASDAQ: PANW) is one of the leaders in AI security, and its earlier decision to stop selling point solutions and have customers consolidate on one of its platforms has been paying off.

As a leader in next-generation security, Palo Alto has a bright future. However, the stock is extremely pricey, trading at a forward price-to-sales ratio (P/S) of 19, based on fiscal 2027 (ending September 2027) estimates, while growing its revenue by 34% last quarter. That's just too pricey in my book, and as such, I'd pass.

Dell

AI data centers require more than just AI chips, and Dell Technologies (NYSE: DELL) has been benefiting by delivering customers custom end-to-end solutions with ongoing support. Its AI Factory includes everything from hardware -- like servers, networking equipment, power, cooling, storage, and data management infrastructure -- to software and security services. It also includes edge devices like PCs.

The company is seeing surging revenue, up 58% last quarter, and it sees full-year revenue climbing 69%. Traditional servers and networking revenue skyrocketed 122%, while storage was up 26% and client solutions rose 20%. While Dell is a top-tier systems integrator with deep supply-chain scale and high-value enterprise services, it still functions largely as a hardware pass-through, and its 21% gross margin reflects that reality.

An investment in the stock largely comes down to the company continuing to ride the AI infrastructure wave and continuing to benefit from operating leverage as it scales. With the AI boom looking like it still has legs, the stock looks like a buy.

Arista Networks

Arista Networks (NYSE: ANET) is benefiting from AI chip clusters growing in size and complexity and the need to better manage AI networks. The company is a close partner with Broadcom, where it assembles its networking components together and layers on its Extensible Operating System (EOS) software platform so customers can easily manage their networks.

Microsoft and Meta Platforms are two of Arista's largest customers, and it's benefiting from their aggressive spending on AI infrastructure. However, it said it now has hundreds of customers that have adopted its solutions, up from only four or five in 2024. Arista grew its revenue by 38% last quarter and now expects its revenue to climb by 40% this year.

Despite the company's momentum, with the shares trading at a forward P/E of 37, based on 2027 analyst estimates, I'd pass on the stock at this time.

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Geoffrey Seiler has positions in Broadcom and Meta Platforms. The Motley Fool has positions in and recommends Arista Networks, Broadcom, Meta Platforms, and Microsoft. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.

4 AI Stocks Are Joining the S&P 500: Buy, Hold, or Pass? was originally published by The Motley Fool