Artificial intelligence (AI) is a generational investment opportunity, but you don’t need to take unnecessary risks to profit from AI. One of the best ways to profit from the growth of this technology is to invest in leading cloud service providers.

According to Synergy Research, the cloud market is worth $297 billion and is still growing at high rates. Including cloud leaders Alphabet (GOOGL 1.57%) (GOOG 1.50%) And Microsoft (MSFT 0.80%)It produces returns for its investors that outperform the broader market, and it should continue that winning streak for many years to come.

If you have $500 or more to invest right now, here’s why you should consider buying at least one stock of these elite tech companies.

1. Alphabet (formerly Google)

Alphabet’s shares have more than doubled in the past five years, but Google’s parent company continues to report solid growth in its advertising and cloud businesses. Shares are up 23% year to date, S&P 500.

Many customers choose Google Cloud over the #1 cloud service provider. Amazon Web Services (AWS). Reasons for choosing one cloud provider over another may vary, but a few factors that work in Google Cloud’s favor are tools that make it easier for customers to move data from their on-premises servers and a more modern user interface. Google Cloud’s revenue rose 28% year over year to $10.4 billion in the second quarter, outpacing broader cloud market growth of 22%, according to Synergy Research.

Alphabet continues to increase capital investment in its cloud business. of the company capital expenditure It increased to $44 billion in the last four quarters. Google is developing more data centers and AI tools to meet growing demand in the cloud.

Moreover, Google’s Vertex AI platform is gaining support from large organizations that need to develop new technologies, including the US Air Force. productive artificial intelligencesupported applications. The engine behind Vertex and other AI services Geminithe company’s AI model that powers many features in Google Cloud and Google’s consumer products like Search.

Most importantly, Google Cloud’s operating revenue rose to more than $1.1 billion in the second quarter of 2024, from $395 million in the same quarter a year ago. This shows that Alphabet can make the necessary investments in key technologies such as artificial intelligence while increasing margins to benefit shareholders.

Alphabet will announce its third-quarter financial results on October 29. Over the long term, Wall Street expects the company to report double-digit earnings growth. Stock trading is reasonable forward price/earnings ratio Over 19 in 2025 earnings estimates, Google investors We should expect the stock to reach new highs in the near term and in the years to come.

2.Microsoft

Microsoft stock Like Google, Microsoft offers software products that millions (if not billions) of people use every day, including Windows, which runs on 72% of desktop computers. Statista.

However, the software giant continues to experience the greatest momentum in enterprise cloud services. It is currently the No. 2 cloud service provider behind AWS, but Microsoft is rapidly narrowing Amazon’s lead. Microsoft Azure cloud service grew faster than Google Cloud in the last quarter of June, with revenue up 29% from a year earlier.

Microsoft is leveraging its game-changing partnership with OpenAI, the company behind ChatGPT. OpenAI has brought significant improvements to Microsoft’s software offerings, including Azure, where the Azure OpenAI service is now used by most of the Fortune 500.

Microsoft continues to pour billions of dollars into more data centers. Coincidentally, Microsoft’s capital expenditures have been almost the same as Alphabet’s ($44 billion) over the last four quarters. He does this as he grows up. net income It reached 22 billion dollars last quarter, with an annual increase of 10%.

Microsoft’s capital investments are up 79% since the end of 2022, compared to Alphabet’s 40%. In its last earnings call, management said the company is laying the groundwork to support growing cloud demand over the next decade and beyond. Opportunities in cloud computing and artificial intelligence are clearly in their infancy.

Microsoft will announce its first quarter financial results for fiscal 2025 on October 30. However, analysts expect its earnings to rise 13% year-on-year. Investors should be well rewarded for holding this stock for the long term.