The cloud market has ballooned in recent years. The COVID-19 pandemic increased demand for cloud services as businesses adopted hybrid working styles and digital payment models.
And now, the industry has received another boost thanks to advances in artificial intelligence (AI). Countless companies are seeking AI services to improve productivity, putting cloud giants and chipmakers in a position to profit handsomely from the rise. Fortune Business Insights values the cloud market at $569 billion and projects it will grow at a 20% rate through 2030.
With the sector still having plenty to offer investors over the long term, now might be a great time to add a cloud stock to your holdings. Here are three to consider in October.
1. Amazon
Amazon's (AMZN 2.63%) stock is up 54% year to date, with Wall Street rallying over its potential in AI and what that could mean for its cloud business. The company's cloud platform, Amazon Web Services (AWS), serves some of the world's most prominent companies, including Netflix, Sony, and Meta Platforms, to name a few. Its success in the sector has allowed AWS to snap up a leading 32% market share in cloud computing.
Amazon's command of the market could give it an edge in AI as companies increasingly look to integrate the technology into their businesses with the use of cloud services. The retail giant is exploiting this advantage by heavily investing in its artificial intelligence tech. Amazon has unveiled several new AI tools for AWS this year alongside a venture into chip development.
Moreover, news broke last month that Amazon will invest up to $4 billion in Anthropic, a rival to ChatGPT developer OpenAI. The partnership could help Amazon retain its position at the top of the cloud market and more easily compete with Microsoft, which holds a 49% stake in OpenAI.
Amazon's long-term prospects in cloud computing are bright with its leading market share, and it has the resources to stay competitive.
2. Nvidia
All eyes have been on Nvidia (NVDA -3.63%) this year as its chips have become critical to the development of AI. The company's years of dominance in graphic processing units (GPUs) perfectly positioned it to profit immensely from a boom in the market as demand has soared for its hardware. Increased interest in AI has also triggered a shift in the cloud market.
Central processing units (CPUs) were once the most coveted chips in cloud computing, with companies like Advanced Micro Devices and Intel benefiting most from high CPU sales. However, an expansion of AI services has made GPUs far more crucial.
The shift can be seen in a spike in Nvidia's earnings. In the company's second quarter of 2024 (ended July 2023), revenue rose 101% year over year to $13.5 billion. The jump was primarily due to a 171% increase in data center revenue as chip sales skyrocketed.
AI market growth has made Nvidia one of the year's best cloud stocks. It could experience decreased growth next year as other chipmakers launch competing GPUs. However, its dominance will likely continue to offer consistent gains over the long term.
3. Alphabet
Alphabet's (GOOG 1.23%) (GOOGL 1.31%) cloud service Google Cloud is the third-largest platform in the industry after Amazon and Microsoft, with a market share of 10%. It may not have the market dominance of its two biggest rivals, but its smaller business could mean it has more room for growth and more to offer investors.
In fiscal 2022, Google Cloud revenue soared 37% year over year, hitting $26 billion. Meanwhile, AWS revenue rose 29%, and Microsoft's Azure grew 28% in the same year. In addition to outpacing its competitors in cloud growth, Alphabet is keeping up with the market by heavily investing in AI.
Google Cloud offers a range of AI services, with the company also sprinkling the technology across its product lineup. Alphabet plans to introduce AI upgrades to YouTube, Docs, Sheets, Gmail, and more. However, one of its biggest focuses is using AI to take Google Search to the next level as it competes with Microsoft's Bing. The direction is justified by the fact Search earned $162 billion in revenue last year and is responsible for over 80% of the market.
Alphabet is a slightly smaller player in the cloud market than Amazon and possibly even Nvidia. However, the company's services attract billions of users daily, suggesting you shouldn't count it out.
