Artificial intelligence (AI) is making a significant impact in helping businesses improve efficiency, but this is just the beginning compared to where AI will be in another 20 years. Morgan Stanley expects AI to drive $40 trillion in long-term operating efficiencies.
There are two ways for investors to profit from this opportunity. Investing in companies that provide cloud infrastructure for AI training is one opportunity. Another is investing in companies that are well-positioned to deploy AI-powered services to a vast installed customer base.
Here are two stocks that fit this criteria you can buy now.
Image source: Getty Images.
1. Oracle
Among the top cloud infrastructure plays, one of the most promising stocks to invest in is Oracle (ORCL +2.43%). Oracle is a juggernaut in helping businesses store, manage, and analyze their data with its market-leading database services. It is playing an increasingly valuable role as enterprises seek flexible cloud solutions to leverage AI.
The cloud market is very competitive. However, Oracle's competitive advantage lies in its ability to enable companies to utilize multiple cloud platforms. Its multicloud revenue soared more than 1,500% last quarter. Companies are choosing Oracle as it integrates AI tools into its database services for automating tasks. Oracle's revenue from autonomous databases surged 43% in the recent quarter, a notable acceleration from the 26% growth rate in the year-ago quarter.
NYSE: ORCL
Key Data Points
Oracle's growth is driven by 34 multicloud data centers available through all the leading cloud service providers. Plans are underway to bring another 37 online, bringing the total to 71. Oracle's cloud infrastructure business is thriving, with revenue growing at a faster pace than the rest of the cloud market.
Oracle has an extensive backlog of business that management says will drive accelerating revenue growth in the coming years, as reflected in Wall Street's consensus growth projections. Analysts expect Oracle's total revenue to grow from $57 billion in fiscal 2025 to $223 billion by fiscal 2030, representing a compound annual growth rate of 31%. Adjusted earnings per share are expected to grow at similar rates.
Oracle's leadership in cloud database services, combined with its prospects for massive growth, should deliver market-beating returns for investors over the next five years.
2. Meta Platforms
Meta Platforms (META 0.07%) is known as the leading social media company with more than 3.5 billion people across its family of apps. While this provides the company with a profitable stream of revenue from advertising, that's not the reason to buy the stock right now. Meta is reinvesting its profits into building the future of AI, which is personalized superintelligence for everyone.
NASDAQ: META
Key Data Points
In its 2024 annual report, Meta disclosed that it owns 27 data center locations globally. This will undoubtedly grow over time. These assets position Meta well for long-term growth, enabling it to efficiently enhance its proprietary AI models, which will ultimately lead to new products and services that can be monetized across a large user base.
This is why the company is not hesitant to increase its capital spending on infrastructure. It spent $62 billion in capital expenditures over the last year, and this is expected to increase. Meta earns a high return on invested capital of 25%, indicating that more capital investment in the business should lead to higher profits over the long term.
Moreover, Meta's large user base is valuable in allowing the company to quickly test its AI at scale. It is already seeing AI improvements to its recommendation engine, driving increases in time spent on its apps, such as Facebook and Instagram. A deep pipeline of improvements is underway to enhance its AI models and sustain this momentum. These AI enhancements are expected to continue driving ad revenue growth, providing additional capital to invest in AI and fostering a positive growth cycle.
This is a highly profitable business with significant competitive advantages that will continue to grow in value for shareholders. Analysts expect the company's free cash flow to nearly double by 2030 to $97 billion, which should also double the stock's value.
