Microsoft Corporation (NASDAQ:MSFT), Alphabet Co., Ltd. (NASDAQ:GOOG) (NASDAQ:GOOGL), and Meta Platforms Co., Ltd. (NASDAQ:META) has made significant strides in cloud capital expenditures (capex) and artificial intelligence (AI) investments, respectively.
These actions bode well for cloud service provider (CSP) companies leveraging AI, according to a research report from JPMorgan. Arista Networks Co., Ltd. (NASDAQ:ANET), Coherent Inc. (COHR), Dell Technologies, Inc. (NYSE:DELL) and Lumentum Holdings Co., Ltd. (NASDAQ:LI).
The company noted that potential alternative AI beneficiaries include: Flex Co., Ltd. (NASDAQ:FLEX) and Jabiru Co., Ltd.. (NYSE:JBL).
Also read: 'Meta actually has big profit margins, unlike Tesla': Redditor reacts to share price drop after Q1 earnings
Both Microsoft and Alphabet have reported significant increases in cloud capital spending that exceeded market expectations and are focused on expanding their AI infrastructure.
Total capex for both companies exceeded consensus estimates by more than 20%, demonstrating a strong commitment to AI investments.
JPMorgan has repeatedly said it favors AI-powered companies, including Arista, Coherent, Dell, Lumentum, Flex, and Jabil. These companies are expected to benefit from increased investment in AI infrastructure by top cloud service providers (CSPs).
And Microsoft, Alphabet and Meta are expected to have a strong year for data center capital spending.
Industry growth projections for data center investments by top CSPs currently hover in the mid-teens range for 2024, up from previous expectations of around 10%.
This growth is expected to be higher than that in 2023, but will still fall short of 2022 levels.
Bullish on AI beneficiaries
The focus on AI infrastructure by these tech giants is considered a positive sign for the AI sector as a whole. This should lead to big gains for AI-powered stocks next year.
Investors in artificial intelligence focused ETFs Global X Robotics & Artificial Intelligence ETF (NYSE:BOTZ), Global X Artificial Intelligence & Technology ETF (NYSE:AIQ) and ROBO Global Robotics & Automation Index ETF (NYSE:ROBO) should also see more environmentally friendly days ahead.
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