Since the definition is recursive, induction is natural for this problem, and it works if you first show $A_n \ge \sqrt{2}$, for all $n$.
Based on that strategy, here's a proof . . .
If $A_n\;$is positive, so is $A_{n+1},\;$hence, since $A_0 = 2 > 0,\;$it follows that $A_n > 0,\;$for all $n$.
Note that $A_0 = 2 > \sqrt{2}$.
By AM-GM,
$$A_{n+1} = \frac{A_n}{2} + \frac{1}{A_n} \ge 2\sqrt{\frac{1}{2}} = \sqrt{2}$$
Thus, $A_n \ge \sqrt{2},\;$for all $n$.
The goal is to prove $A_n \le \sqrt{2} + {\Large{\frac{1}{2^n}}},\;$for all $n$.
Proceed by induction on $n$.
For $n=0,\;$we have $A_0 = 2 < \sqrt{2} + 1 = \sqrt{2} + {\Large{\frac{1}{2^0}}}$.
Assume the inequality $A_n \le \sqrt{2} + {\Large{\frac{1}{2^n}}}\;$holds for some integer $n \ge 0$.
\begin{align*}
\text{Then}\;\;A_{n+1}
&= \frac{A_n}{2} + \frac{1}{A_n}\\[4pt]
&\le
\frac
{\sqrt{2} + {\Large{\frac{1}{2^n}}}}{2} + \frac{1}{\sqrt{2}}\\[4pt]
&=\frac{\sqrt{2}}{2} + \frac{1}{2^{n+1}}+ \frac{\sqrt{2}}{2}\\[4pt]
&=\sqrt{2} + \frac{1}{2^{n+1}}\\[4pt]
\end{align*}
which completes the induction, and thus completes the proof.