3 unstoppable stocks that could profit from artificial intelligence (AI) construction

Over the past few years, the biggest market driver has been the growth of the artificial intelligence (AI) industry. In the simplest terms, AI’s advanced algorithms can be deployed to streamline and automate many time-consuming tasks, freeing people for advanced work. As a result, many believe that generated AI will spark a wave of productivity growth, creating windfall profits for the companies best positioned to take advantage of this cutting-edge technology.

Earlier this week, President Donald Trump announced an initiative called Project Stargate, which he said would be “the largest AI infrastructure project in history.” The private joint venture will initially consist of Softbank,Openai, OracleMGX, an AI-focused investment fund, “intends to invest $500 billion in AI infrastructure over the next four years,” according to a press release. The plan plans to build up to 20 huge data centers across the country to meet the processing power needs of AI systems.

The announcement also revealed the identities of several companies that will be tapped to provide the necessary technology. Let's look at three that are profiting from this massive infrastructure investment.

Stock chart on mobile device rising with $100 in chips. — Image source: Getty Images.

not surprising Nvidia (NASDAQ:NVDA) Selected as one of the “Major Initial Technology Partners” for the Stargate project. The company pioneered graphics processing units (GPUs), which have become a staple provider of the specific types of computing horsepower required for AI.

NVIDIA GPUs are the gold standard for AI processing – most of which happens in the data center. As a result, the company dominates the niche, controlling 98% of the market in 2023, a similar market share to 2022. While 2024 numbers haven't been compiled yet, industry observers are hoping to learn that NVIDIA retains share of the industry leader's data center GPU market.

There is concern among some investors that NVIDIA's growth may have peaked, but the scope of Project Stargate helps illustrate the long runway. In fact, Melius Research analyst Ben Reitzes speculates that the chipmaker could be the biggest single beneficiary of Project Stargate, as “more than $100 billion” of its budget could go to NVIDIA .

Trading at just 33 times next year's forecasts, NVIDIA is attractively priced given its ongoing opportunity.

Openai, the creator of Chatgpt, has partnered with Microsoft (NASDAQ:MSFT)so the company will be hired as a supplier. The press release notes that the initiative “builds on the existing OpenAI partnership with Microsoft” and that the company will continue to “increase its consumption of Azure's Cloud Infrastructure services from Microsoft.”

Microsoft has made clear that demand for AI is driving its cloud growth. CEO Satya Nadella noted that in its first quarter of fiscal 2025, which ended Sept. 30, Azure Cloud had a share of 24% from its competitors, with 24% of the industry The growth rate compared to the same period last year was an increase of 34%. Nadella also noted that 12 percentage points of that growth was the result of demand for AI-related services. Perhaps more importantly, he noted that “demand remains higher than our available capacity.”

The company has taken steps to address this imbalance. In a blog post earlier this month, Microsoft Vice Chairman and President Brad Smith noted that the company is on track to invest $80 billion in data centers around the world “to train AI models and deploy them globally.” AI and cloud-based applications”.

The company was quick to offer AI solutions that are now paying off. The combination of relentless demand for AI and Microsoft's leadership in the field suggests that the best possibilities may not yet be there.

Microsoft stock currently trades at 34 times next year's expected earnings, which is a reasonable valuation given its place in the AI ecosystem.

arm holding (NASDAQ:ARM) There's also a lot to gain from the Stargate project due to its strong ties to Nvidia and its contributions to AI-focused chips. “This is a big, big deal,” CEO Rene Haas said in an interview this week.

While NVIDIA has started shipping new Blackwell processors, a look at its previously top-of-the-line Grace Hopper GH200 SuperChip can help provide context. GH200 combines CPU and GPU technology on the same processor to meet the rigorous requirements of AI. It combines two grace CPUs, each containing 72 ARM V9 cores, for a total of 144 CPU cores in each chip. Reports suggest Blackwell GB200 The platform contains the same number of these high-end cores, which is a perfect fit for ARM.

In an interview last year, CEO Rene Haas noted that many of ARM's customers were moving to V9 and using more of these cores per device. This is important because V9's royalties are double those of its predecessor, suggesting that ARM's sales growth will continue to accelerate.

ARM's rapid growth has been accompanied by a corresponding increase in its valuation, although the most commonly used metrics are lacking in valuing high-growth stocks. Using a more appropriate price/earnings growth (PEG) ratio, ARM's valuation clocks at 0.24. A stock with any positive number for this metric below 1 is generally considered undervalued.

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Danny Vena has positions at Microsoft and Nvidia. Motley Dummies has locations and recommends Microsoft, Nvidia, and Oracle. Motley Dummies suggests the following options: January 1, 2026, Microsoft $395 phone, Short January 2026, Microsoft $405 phone. Motley Fools has a disclosure policy.

President Donald Trump Just Announced Project Stargate: 3 Unstoppable Stocks to Profit from Artificial Intelligence (AI) Buildings originally published by The Motley Fool