AI is accelerating demand for chips and cloud computing services. The AI chip market is expected to grow 29% per year through 2030, according to Grand View Research, while the cloud computing market is expected to increase at an annualized rate of 20%.
For investors looking for quality growth stocks to cash in on this opportunity, here are two no-brainer choices.
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1. Taiwan Semiconductor Manufacturing
Demand for AI chips is driving robust growth for the leading chipmaker, Taiwan Semiconductor Manufacturing (TSM 1.50%). TSMC, as it's also known, makes chips for other designers, including Nvidia, Apple, and Advanced Micro Devices. It controls more than 65% of the global foundry market, according to tech market researcher Counterpoint.
TSMC has invested for decades building expertise in cutting-edge chipmaking processes, which allows its clients to focus on what they do best, which is designing the most powerful chips in the world. The relationship TSMC built with its clients over the years is a competitive advantage. Its moat is so wide that even Intel has not been able to make headway against TSMC despite recent investments to build its own foundry business.
Demand for AI semiconductors and other high-performance chips pushed TSMC's revenue up 44% year over year in the second quarter. Its competitive lead allows it to earn a high net margin of over 42%.
As more investment goes into building more advanced AI, the company should continue to report stellar financial results. Developing smarter AI requires growing amounts of computational power, which is a catalyst for TSMC. The company is investing to expand manufacturing capacity in the U.S. and elsewhere to mitigate the risks of higher costs from tariffs and to be able to meet growing demand.
Despite its commanding lead in the foundry market, the stock looks undervalued, trading at a forward price-to-earnings ratio (P/E) of 28. Analysts expect earnings to rise at an annualized rate of 21% in the coming years. Assuming the stock continues to trade at the same valuation, that is enough growth to double the share price within the next four years.
2. Oracle
AI is a major catalyst for growth in the cloud computing market, since businesses can use AI in the cloud to get better insights from their data. Oracle (ORCL -0.89%) might be the best cloud stock to buy based on its leadership in enterprise database services and its extensive data center infrastructure that is optimized for AI.
Oracle's total revenue grew 12% year over year last quarter, but that doesn't tell investors about the real momentum happening in the business. The stock is soaring on the accelerating growth in its cloud infrastructure business, where the company is signing deals with major tech companies. In the second quarter, its remaining performance obligations (contracted revenue not yet realized) surged 359% year over year.
This impressive growth shows Oracle is becoming the preferred choice for AI workloads in the cloud. It can bundle its industry-leading database services with top AI models.
It also benefits from offering cloud customers integrated services across other cloud platforms like Amazon, Alphabet's Google, and Microsoft. This is clearly attractive to its customers -- Oracle's multi-cloud revenue jumped 1,529% last quarter.
Management expects the momentum to continue, as more workloads shift from AI training to inferencing, where models learn to make forecasts from new data. Its cloud infrastructure revenue is expected to grow 77% for the full year.
The stock is soaring because the robust demand in cloud infrastructure will grow its total revenue by 16% in fiscal 2026 on a constant-currency basis, indicating accelerating growth. This justifies the stock's high P/E multiple. AI is creating a more sticky relationship with Oracle's cloud database customers, setting up excellent return prospects for investors.
