Key Points
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The adoption of AI is driving strong demand for computer chips and cloud computing services.
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As the world's largest chip manufacturer, Taiwanese semiconductor manufacturing is well positioned to provide outstanding returns to investors.
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Oracle's growth is driven by demand for cloud infrastructure businesses.
AI is accelerating the demand for chips and cloud computing services. According to Grand View Research, the AI chip market is expected to increase by 29% per year through 2030, while the cloud computing market is expected to increase by 20% per year.
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1. Taiwan Semiconductor Manufacturing
Demand for AI chips is driving robust growth for major chip manufacturers. Taiwan Semiconductor Manufacturing(NYSE: TSM). TSMC creates chips to other designers as it is known. nvidia, appleand Advanced Micro Devices. According to Tech Market Researcher Counterpoint, it manages more than 65% of the global foundry market.
For decades, TSMC has built expertise in cutting-edge chipmaking processes. The relationship TSMC has been built with clients over the years, a competitive advantage. The moat is very large so it's even Intel Despite recent investments to build their own casting business, we have not been able to move forward against TSMC.
Demand for AI semiconductors and other high-performance chips led to TSMC's revenues rising 44% year-on-year in the second quarter. Its competitive lead allows you to earn net profits of over 42%.
As more investments go towards building more advanced AI, the company will need to continue reporting its stellar financial results. The development of smarter AI is increasing the computing power that is the catalyst for TSMC. The company is investing in expanding manufacturing capacity in the US and elsewhere so that it can reduce the risk of higher costs from tariffs and meet the growing demand.
The foundry market commander has seen its stocks undervalued, trading with a positive price-to-earning ratio (P/E) of 28 people. Analysts expect revenues to rise by 21% per year over the next few years. Assuming that the stocks continue to trade at the same valuation, it is growing enough to double the stock price within the next four years.
2. Oracle
AI is a major catalyst for the growth of the cloud computing market as it can use AI in the cloud to gain better insights from data. Oracle(NYSE: ORCL) It may be the best cloud stock to purchase based on the leadership of enterprise database services and the extensive data center infrastructure optimized for AI.
Oracle's total revenues rose 12% year-on-year from the previous quarter, but that doesn't tell investors about the real momentum going on in the business. The stock is surged to accelerated growth in the cloud infrastructure business, where the company has signed contracts with major high-tech companies. In the second quarter, remaining performance obligations (contract revenue that has not yet been realized) skyrocketed 359% year-on-year.
This impressive growth shows that Oracle is a favourable choice for AI workloads in the cloud. You can bundle industry-leading database services using top AI models.
It also benefits from providing cloud customers with integrated services across other cloud platforms. Amazon, alphabetGoogle, and Microsoft. This is clearly appealing to customers – Oracle's multi-cloud revenues rose 1,529% in the last quarter.
Management hopes momentum will continue as more workloads move from AI training to inference, and models learn to make predictions from new data. Cloud infrastructure revenue is expected to increase by 77% year-round.
Inventories are rising sharply as robust demand for cloud infrastructure increases total revenue for fiscal year 2026 by 16% on a constant currency basis. This justifies the high P/E multiple of stock. AI creates more sticky relationships with Oracle's Cloud database customers, setting a great return outlook for investors.
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John Ballard has an advanced microdevice and Nvidia position. Motley Fool introduces and recommends advanced microdevices: Alphabet, Amazon, Apple, Intel, Microsoft, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. Motley Fool recommends the following options: A $395 call with Microsoft for January 2026 length, a $405 call with Microsoft for January 2026 short term, a $405 call with Microsoft for November 2025 short term $21 will launch Intel. Motley Fools have a disclosure policy.
