Global management consulting firm McKinsey & Company recently published a report detailing compelling trends in research and development (R&D) and capital expenditure (capex) related to artificial intelligence (AI) investments over the next five years.
Per McKinsey's analysis, spending on AI infrastructure could reach $6.7 trillion by 2030. Among these different infrastructure opportunities, McKinsey estimates that nearly $3.1 trillion will be allocated toward chip designers for AI-equipped data centers.
Let's analyze which companies are making major investments in AI infrastructure right now and explore what they're investing in. From there, I'll reveal my top four data center stocks to load up on right now and explain why.
The big spenders
Investors don't need to look much further than the "Magnificent Seven" to buy into McKinsey's forecast around rising AI-related capex. For the last couple of years, Microsoft, Alphabet, and Amazon have been shelling out billions, partnering with high-profile businesses such as OpenAI (maker of ChatGPT) and Anthropic.
Data by YCharts.
Integrating large language models (LLMs) and generative AI into their respective ecosystems has supercharged growth for megacap tech -- especially in areas such as cybersecurity, workplace productivity software, and cloud computing infrastructure.
Just this year alone, Microsoft, Alphabet, and Amazon are forecast to spend nearly $260 billion on capex. Per the commentary of their respective management teams, much of this spend will be allocated toward chips and outfitting AI data centers -- just as McKinsey is calling for.
In addition to the cloud hyperscalers above, Meta Platforms recently told investors that it is actually raising its capex budget for 2025. Similar to Microsoft, Alphabet, and Amazon, Meta has proven to be a big buyer of chips over these last few years. Additionally, each of these Magnificent Seven members has also been exploring their own custom silicon.
With this backdrop, here are four companies that stand to benefit from these AI infrastructure tailwinds.
Image source: Getty Images.
Who will benefit from these AI infrastructure investments?
When it comes to AI chip designers, my top two picks are Nvidia (NVDA 0.28%) and Advanced Micro Devices (AMD 1.91%). Per industry estimates, Nvidia is estimated to hold 90% (or more) of the AI GPU market with AMD comprising much of the remainder. Considering each company I referenced above currently runs on both Nvidia and AMD chip architecture, the capex spend for this year should be a major tailwind for both chip stocks.
Moreover, Broadcom (AVGO -1.76%) stands to benefit from rising AI infrastructure spend in a couple of ways. First, the company specializes in outfitting data centers with networking equipment needed to house GPU clusters. Broadcom can also lend a hand in the area of custom silicon (which it's currently doing already with Meta).
Lastly, and perhaps the most lucrative opportunity of all, is Taiwan Semiconductor Manufacturing (TSM -0.13%). Taiwan Semi specializes in the fabrication processes needed to actually make the chips designed by Nvidia, AMD, Broadcom, and more.
Among Nvidia, AMD, Broadcom, and TSMC, each company plays a mission-critical role in the development of AI-powered services. Given the spending patterns from AI's biggest players appear to be very much still in motion, all four of these semiconductor stocks are well positioned for accelerated growth for years to come.
All of these AI data center stocks look like great buys right now
The chart below illustrates the forward price-to-earnings (P/E) multiples for Nvidia, Broadcom, AMD, and TSMC.
Data by YCharts.
There has been a considerable drop in the forward P/E ratios for these companies in recent months. Much of this valuation compression has to do with uncertainty around President Trump's new tariff policies. While some progress appears to have been made, it's still a fluid situation. In my eyes, many investors are sitting on the sidelines right now -- waiting to see what management teams at these companies have to say in terms of financial guidance over the next quarter or second half of the year.
As a long-term investor, I'm not overly concerned about what the next couple of quarters may look like. Rather, I'm more keyed into the secular themes fueling AI growth right now. As McKinsey models in its reporting, spending on AI infrastructure -- particularly chips and data centers -- should continue to experience robust growth over the next several years.
For these reasons, I would take advantage of any weakness among these chip stocks and prepare to hold on tight.
