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Companies whose products are being placed inside data centers are seeing massive growth.
Cloud computing providers are also benefiting from the massive demand for artificial intelligence.
Although the artificial intelligence (AI) arms race has been underway since the start of 2023, there is no shortage of stocks that remain excellent investments at present. We're far from reaping the benefits of the rise of AI across the entire economy, and significant infrastructure still needs to be built out.
This is where I'm focusing a lot of my attention as AI infrastructure is a key area where companies are generating significant revenue from AI investments. I have identified 10 stocks that play in this realm and look like intriguing buys now. Investors should use this list as a great starting point to learn more about each company.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »
Image source: Getty Images.
No good AI investing list is complete without the undisputed king of AI: Nvidia (NASDAQ: NVDA). Nvidia's graphics processing units (GPUs) have been the computing muscle behind AI models from the start, and it continues to lead this important industry.
NVDA Revenue (TTM) data by YCharts. TTM = trailing 12 months.
There is still a significant amount of AI buildout underway, and Nvidia's GPUs will continue to handle this demand. Although the stock is currently the largest in the world, it still has plenty of upside left.
Broadcom (NASDAQ: AVGO) also provides AI computing hardware, featuring custom AI accelerators designed in collaboration with the end user. These are being deployed alongside GPUs and represent an excellent way to cut costs when building out inference capacity. Broadcom is a rising player in the AI space, and investors should keep a close eye on it over the next few years.
Taiwan Semiconductor Manufacturing (NYSE: TSM) produces chips for companies like Nvidia and Broadcom that lack the in-house capabilities to do so themselves. They're a key part of the AI value chain and could be one of the most critical companies on Earth.
TSMC's management forecasts a substantial 45% compound annual growth rate (CAGR) for its AI-related revenue over the five-year period starting in 2025. That would lead to significant growth if this guidance proves accurate.
Taiwan Semiconductor's factories are equipped with machines from ASML (NASDAQ: ASML), as the company is the only one in the world with extreme-ultraviolet lithography technology. Their machines help lay the tiny electrical traces on chips and are used in every high-tech chip production facility due to their technological monopoly.
As more chip production comes online to meet the rising demand for AI, ASML will continue to sell more machines.
Digital Realty Trust (NYSE: DLR) offers a distinct approach to participating in the AI arms race. It's a real estate investment trust, which normally doesn't land on tech investors' radars. However, Digital Realty is focused on building data centers that it can rent out to clients.
This is a massive and quickly growing field, and with Digital Realty's nearly 3% dividend yield, it's an excellent dividend payer as well.
Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is playing both sides of the AI arms race, as it develops its own AI models while also facilitating those of others.
One area it helps further AI is through its cloud computing wing, Google Cloud. Cloud computing providers build computing capacity and rent it out to clients. This can be used for traditional computing workloads or AI. AI demand has driven cloud computing into another growth wave, and it's expected to continue growing for many years.
Of the three I'll discuss, Amazon (NASDAQ: AMZN) has the largest cloud computing platform, Amazon Web Services (AWS). AWS is a key part of Amazon's financial picture, as it provided 63% of Amazon's operating profits in Q1. AWS also grew at a 17% pace in Q1, indicating that Amazon's largest profit source is rapidly expanding.
AWS will be an essential part of Amazon's growth picture moving forward, and understanding that is key to investing in Amazon.
Microsoft (NASDAQ: MSFT) has the second-largest cloud computing platform, Azure. Although Microsoft has partnered with OpenAI, the makers of ChatGPT, it's also facilitating many other AI models on its platform. Microsoft aims to provide a platform on which clients can build their AI models, and this endeavor has been largely successful, given Azure's growth.
Unfortunately, Microsoft only provides us with Azure's growth rate (33% in its latest quarter), but it's likely a significant contributor to Microsoft's overall revenue and profits. Considering the bright cloud computing outlook, this makes it an excellent AI stock pick.
Arista Networks (NYSE: ANET) is one of the lesser-known names on this list, but its products are crucial for data centers to operate at a high level. Their networking solutions enable clients to connect data centers across multiple locations, a crucial aspect of AI processing and cloud computing.
Without Arista's technology, cloud computing and AI wouldn't look the same as they do today. And considering the massive data center buildout that's coming, it has plenty of room to grow.
Synopsys (NASDAQ: SNPS) provides a software program that enables customers to design semiconductors. Without Synopsys' technology, the research and development cycle for chips would be significantly longer, which would slow the pace of innovation in the AI world. Synopsys is a key part of AI advancement, and its software will continue to be a must-have for those involved in the AI field.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Keithen Drury has positions in ASML, Alphabet, Amazon, Broadcom, Digital Realty Trust, Nvidia, Synopsys, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends ASML, Alphabet, Amazon, Arista Networks, Digital Realty Trust, Microsoft, Nvidia, Synopsys, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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