It will be a massive undertaking to build out the hardware and support necessary to power increasingly advanced artificial intelligence and provide it at a global level where billions of people can access it.
According to research by McKinsey & Company, the world's technology needs will require $6.7 trillion in data center spending by 2030. Of that, $5 trillion will be due to the rising processing power demands of artificial intelligence (AI). These investments, though, will lay the groundwork for the next era of global innovation, which will revolutionize existing industries and create new ones.
Some key companies have already been experiencing significant growth due to the AI trend, and there is still likely a long runway ahead for players in key AI infrastructure spaces, including semiconductors, cloud computing, and networking.
Here are five top stocks to buy and hold for the next wave of AI innovation.
Image source: GETTY IMAGES
Nvidia: The data center AI chip leader
Inside these colossal AI data centers are many thousands of AI accelerator chips, usually from Nvidia (NVDA 0.87%). The company's graphics processing units (GPUs) are the only ones that can make use of its proprietary CUDA platform, which contains an array of tools and libraries to help developers build and deploy applications that use the hardware efficiently. CUDA's effectiveness -- and its popularity with developers -- has helped Nvidia win an estimated 92% share of the data center GPU market.
NASDAQ: NVDA
Key Data Points
The company has maintained its winning position as it progressed from its previous Hopper architecture to its current Blackwell chips, and it expects to launch its next-generation architecture, with a CPU called Vera and a GPU called Rubin, next year. Analysts expect Nvidia's revenue to grow to $200 billion this year and $251 billion in 2026.
Amazon and Microsoft: Winning in AI through the cloud
AI software is primarily trained and powered through large cloud data centers, making the leading cloud infrastructure companies vital pieces of the equation. They're also Nvidia's largest customers. Amazon (AMZN 0.47%) Web Services (AWS) has long been the world's leading cloud platform, with about 30% of the cloud infrastructure market today.Through the cloud, companies can access and deploy AI agents, models, and other software throughout their businesses.
AWS's sales grew by 17% year over year in Q1, and it should maintain a similar pace. Goldman Sachs estimates that AI demand will drive cloud computing sales industrywide to $2 trillion by 2030. Amazon will capture a significant portion of that, and since AWS is Amazon's primary profit center, the company's bottom line should also thrive.
It's a similar theme for Microsoft (MSFT 0.64%). Its Azure is the world's second-largest cloud platform, with a market share of approximately 21%. Microsoft stands out from the pack for its deep ties with millions of corporate clients. Businesses rely on Microsoft's range of hardware and software products, including its enterprise software, the Windows operating system, and productivity applications such as Outlook and Excel.
NASDAQ: MSFT
Key Data Points
Microsoft's vast ecosystem creates sticky revenue streams and provides it with an enormous customer base to cross-sell its AI products and services to. Microsoft has also invested in OpenAI, the developer behind ChatGPT, and works with it extensively, although that relationship has become somewhat strained as OpenAI has grown increasingly successful.
Regardless, Microsoft's massive footprint across the AI and broader tech space makes it a no-brainer.
Arista Networks and Broadcom: The networking tech that underpins AI
Within data centers, huge clusters of AI chips must communicate and work together, which requires them to transfer massive amounts of data at extremely high speeds. Arista Networks (ANET +0.08%) sells high-end networking switches and software that help accomplish this. The company has already thrived in this golden age of data centers, with top clients including Microsoft and Meta Platforms, which happen to also be among the highest spenders on AI infrastructure.
Arista Networks will likely continue benefiting from growth in AI investments, as these increasingly powerful AI models consume ever-increasing amounts of data. Analysts expect Arista Networks to generate $8.4 billion in sales this year (versus $7 billion last year), then $9.9 billion next year, with nearly 19% annualized long-term earnings growth.
Tightly woven into this same theme is Broadcom (AVGO +1.43%), which specializes in designing semiconductors used for networking applications.
For example, Arista Networks utilizes Broadcom's Tomahawk and Jericho silicon in the networking switches it builds for data centers. Broadcom's AI-related semiconductor sales increased by 46% year-over-year in the second quarter.
NASDAQ: AVGO
Key Data Points
Looking further out, Broadcom is becoming a more prominent role player in AI infrastructure. It has designed custom accelerator chips (XPUs) for AI model training and inference. It has struck partnerships with at least three AI customers that management believes will each deploy clusters of 1 million accelerator chips by 2027. Broadcom's red-hot AI momentum has analysts estimating the company will grow earnings by an average of 23% annually over the next three to five years.
