2 No-Brainer AI Stocks to Buy Right Now

Key Points

• Microsoft and Alphabet are converting AI demand into broad, double-digit growth across their platforms.

• Bolstered by demand for AI computing, cloud momentum at both tech companies is strong.

• Both have established scale, a breadth of products, and substantial cash reserves to sustain funding for AI leadership for years.

• 10 stocks we like better than Microsoft ›

Artificial intelligence (AI) is no longer a story-stock theme -- it's a significant line item in the world's biggest profit and loss statements. If you want exposure without betting on cyclical chip sales or a moonshot app, two established platforms stand out: Microsoft (NASDAQ: MSFT) and Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG).

Both are converting AI interest into real revenue and profit across huge, diversified businesses. Their combination of scale, product breadth, and improving economics makes them straightforward buys for long-term investors looking for exposure to AI.

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Here's why investors seeking to own companies benefiting from AI should consider these two technology giants before venturing into riskier upstarts.

Image source: Getty Images.

Microsoft: AI is helping fuel broad-based momentum

Microsoft's most recent quarter showed exactly what investors should want to see: broad growth with AI as a key tailwind. The software and cloud computing giant's revenue rose 18% to $76.4 billion, operating income jumped 23% to $34.3 billion, and revenue from Microsoft's cloud-based products and services reached $46.7 billion, up 27% year over year.

The company's "Azure and other cloud services" segment was a key driver of its momentum in cloud. Revenue grew an exceptional 39%, a clear signal that AI workloads are expanding Azure's addressable market and deepening customer commitments.

Scale matters, and Microsoft has it. Management said Azure surpassed a $75 billion annual revenue run-rate in fiscal 2025, up 34%, reflecting growth across all workloads. That's a powerful base on which the company is layering premium AI services, from model training to Copilot.

But there's an important nuance when it comes to the software giant's profitability during this AI growth phase. Cloud margins are digesting the surge in AI infrastructure spending. The gross margin for Microsoft's cloud products and services narrowed by one percentage point year over year to 69% as the company scaled up data centers and networking for AI. Yet management also noted efficiency gains in Azure, which should help margins recover as utilization rises and pricing reflects the value of AI features. In other words, near-term pressure is a rational investment for long-term unit economics.

Even more important, however, is the fact that the company's overall cloud gross margin remains higher than its corporate gross margin. The segment's rapid growth, therefore, is leading to strong overall profit increases.

This is the core Microsoft bull case in AI: a flywheel that starts with Azure infrastructure; pulls in data, security, and developer services, and then monetizes users directly through Microsoft 365 and Copilot. With double-digit top-line growth, discipline on costs, and a balance sheet designed to fund years of capital expenditures (capex), the set-up looks favorable.

Alphabet: AI is boosting Search, YouTube, and the cloud

Alphabet's latest results underscore how AI can lift multiple profit centers at once. The Google parent's second-quarter revenue grew 14% to $96.4 billion, with double-digit gains in Search, YouTube ads, and subscriptions, plus 32% growth in Google Cloud to $13.6 billion. Operating margin landed at 32.4%.

Like Microsoft, growth in the cloud is accompanied by big spending to support opportunities related to AI. Management highlighted that Google Cloud's annual revenue run-rate now exceeds $50 billion, and that capex will be about $85 billion in 2025 to meet AI infrastructure demand. Big numbers, yes. But they're paired with improving cloud profitability and a business mix that throws off substantial cash to fund it.

AI is also enhancing Alphabet's core products. Google continues to roll out AI Overviews and AI Mode in search, pushing more-helpful, context-rich results while preserving the ad flywheel that funds the ecosystem. Meanwhile, YouTube continues to benefit from better tools for creators and advertisers, aided by AI.

The general thesis is the same as Microsoft's: Use scale and distribution to ship AI features quickly, then monetize across a vast installed base.

What about valuation risk? With Microsoft trading at 37 times earnings and Alphabet trading at 21 times earnings, neither stock is cheap. The difference compared to many smaller AI upstarts is durability. These aren't point solutions; they're platforms with multiple ways to win: cloud infrastructure, productivity software, developer tools, search, video, and subscriptions. With revenue and operating income growing by double digits and AI workloads compounding inside already sticky ecosystems, the long-term math still works.

For investors who want AI exposure with less risk, these two stocks remain easy buys. You get the training and inferencing demand, the application-layer monetization, and the balance sheets to fund the next wave -- all without needing to predict the winning model or the next breakout app. That's the definition of a no-brainer in an uncertain technology cycle.

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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Microsoft. The Motley Fool 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.