Artificial intelligence (AI) investing remains at the forefront of the market as companies continue to invest billions of dollars in this emerging technology. We've barely scratched the surface of what an AI-first economy looks like, and to achieve this, we'll need to build out significantly more computing capacity.
This is a bullish sign for many companies in this space, and I believe four companies are particularly smart investments to make right now. So, if you have $1,000 (or any other dollar amount) available to deploy, starting with these four is a great idea.
Image source: Getty Images.
AI hardware: Nvidia and Taiwan Semiconductor Manufacturing
On the hardware side of things, Nvidia (NVDA +3.97%) has been king of the AI world since the AI race began. Its graphics processing units (GPUs) are widely deployed in AI applications and have established themselves as the go-to option, with a market share of 90%.
Nvidia has several bullish factors brewing, including the company reapplying for an export license to resume shipping GPUs to China, while being given assurances by the U.S. government that this license will be approved. This will help reaccelerate Nvidia's growth rate, as it projects second quarter revenue to grow 50% year over year; however, it would have been projected to grown 77% if Nvidia were allowed to sell into China during Q2.
That's a massive boost and would allow Nvidia to sustain its jaw-dropping growth rate further into the future. This is a bullish sign for Nvidia's stock, underscoring that Nvidia isn't going anywhere in the AI world.
NVDA Operating Revenue (Quarterly YoY Growth) data by YCharts
Taiwan Semiconductor Manufacturing (TSM +0.62%) is a key supplier to Nvidia, as the company can't produce chips for its GPUs in-house. Instead, it purchases them from TSMC, the leading chip foundry. Taiwan Semiconductor has risen to the top by offering cutting-edge technology alongside best-in-class chip yields, which reduces scrap costs, leading to increased profit for TSMC and better prices for its customers.
TSMC expects massive growth from AI to continue for some time. At the start of 2025, management projected that AI-related revenue would grow at a 45% compounded annual growth rate (CAGR) for five years. Chip orders are often placed years in advance, so when management tells investors that significant growth is coming, they should take notice.
NYSE: TSM
Key Data Points
Both Nvidia and TSMC are poised for significant growth in the years to come, making them excellent stocks to buy now and hold for the long term.
Cloud computing: Amazon and Alphabet
Another industry that's benefiting from AI deployment is cloud computing. Many companies can't afford to build an expensive data center that may not be used to its full capacity, so it makes more sense to rent that computing power from a provider like Amazon (AMZN 1.16%) via Amazon Web Services (AWS) or Alphabet's (GOOG +1.87%) (GOOGL +1.78%) Google Cloud.
Grand View Research found that the global cloud computing market size was around $750 billion in 2024, but that's expected to expand to $2.4 trillion by 2030. That growth is powered by both AI and non-AI workloads migrating to the cloud, and companies like Amazon and Alphabet are well positioned to profit from this trend.
NASDAQ: AMZN
Key Data Points
Each is also a critical part of its parent company's profit picture. In the first quarter, AWS accounted for 63% of Amazon's operating profits, despite comprising only 19% of total revenue. AWS is the profit driver for Amazon, and with its market-beating growth, it's slated to continue driving Amazon's stock higher.
Google Cloud is still working toward AWS' impressive 39% operating margin, as it posted an 18% margin in Q1. However, it's growing faster than AWS (28% growth versus 17% growth) and could become a substantial part of Alphabet's profit picture in the coming years. Cloud computing providers, such as Amazon and Alphabet, are also benefiting from the rise of AI. With the overall cloud computing market expected to expand rapidly over the next few years, these stocks make for smart buys now.
