To say that artificial intelligence (AI) has taken the technology world by storm would be an understatement. Although AI technology has been around for decades, the popularity of OpenAI's ChatGPT and other creative AI tools has pushed the technology into the mainstream.
With the newfound popularity of AI, companies are spending billions to ensure they don't get left behind in what some believe will be the biggest technological advance since the introduction of the Internet. For investors interested in exposure to this exploding trend, the following three companies are excellent options.
1. Microsoft
Microsoft (NASDAQ: MSFT ) is one of a handful of companies that have seen their valuations explode with the AI hype. With a market capitalization of more than $3.1 trillion, Microsoft is the world's most valuable public company.
The tech giant has invested billions in OpenAI and formed a strategic partnership that benefits both parties. Azure, Microsoft's cloud platform, is OpenAI's computing platform and infrastructure, giving it the supercomputing capabilities it needs to train and deploy its models.
In return, Microsoft receives exclusive licenses for OpenAI's major language models (LLMs). With access to OpenAI's LLMs (eg some of the best available), Microsoft can integrate these powerful AI models into its ecosystem of products and services. From Azure to Office products to Dynamic 365, the addition of advanced AI capabilities will improve performance, improve user experience, and enrich Microsoft's offerings.
As for Azure, AI can fuel the growth machine that is already Microsoft's fastest-growing segment. In the third quarter of its fiscal year 2024, Microsoft's revenue rose 17 percent year-over-year to $61.9 billion, driven by a 31 percent increase in revenue from Azure and other cloud services.
Even without recent AI advances, Microsoft's products and services were important in the global business world. With this new component, the company is positioned to be a driving force in technology.
2. Taiwan Semiconductor Manufacturing
While AI is usually associated with software, there are important hardware components that should not be overlooked. There it is. Taiwan Semiconductor Manufacturing (NYSE: TSM ) (TSMC) comes into the picture. TSMC is the world's largest semiconductor producer, making the chips that are the cornerstone of the AI pipeline.
TSMC's chips are used in data centers, graphics processing units (GPUs), AI accelerators, and other products that allow for much faster, more efficient data processing for AI application training, deployment, and operation. Without TSMC's chips, you could argue that AI progress would slow down significantly, making it indispensable in the AI supply chain.
The high performance of TSMC's chips has made them the choice of some of the top tech companies in the world. Microsoft and Amazon (NASDAQ: AMZN ) use for their data centers, Nvidia uses them for its GPUs, apple uses them for smartphones, and dozens of other companies rely on them for their products. It has also done wonders for TSMC's finances.
In the first quarter, TSMC generated revenue of about $18.9 billion, up nearly 13% from a year ago. High Performance Computing (HPC), which includes AI and data center applications, accounts for 46% and is TSMC's largest revenue segment. Smartphones, which accounted for 38% of revenue, remain a sore spot for TSMC with sluggish sales, but that shouldn't negate its long-term growth potential.
3. Amazon
Amazon has been using AI for a while now, whether it's for product recommendations, improving its supply chain, or helping customers with chatbots. Even so, it is still in the early stages of fully incorporating AI into its vast ecosystem of products and services.
Amazon is one of the leaders in machine learning, having invested heavily in the technology. Amazon's cloud platform, Amazon Web Services (AWS), is one of the most comprehensive platforms on the market. It offers SageMaker — which simplifies the process of building, training, and deploying machine learning models — advanced data processing tools, and AI-powered analytics.
AWS is the world's leading cloud platform with 31% market share as of the first quarter. While Azure has a 25% market share and has been growing in recent years, AWS should continue to be Amazon's bread-and-butter profit generator. Although AWS generated only about 17% of Amazon's first-quarter revenue, it accounted for more than 61% of its operating income (profit from its core business operations).
As an extension of its wildly successful e-commerce business, Amazon's introduction of the supply chain is set to gain a lot from AI developments. Supply Chain by Amazon is a one-stop shop for businesses looking to streamline their logistics, and Amazon's AI advancements should further enhance those capabilities.
With its extensive AI integration and AWS expansion, Amazon is well positioned to continue its market-beating growth and return tremendous shareholder value.
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John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, an Amazon subsidiary. Stephen Walters holds positions at Apple and Microsoft. The Motley Fool has positions in and recommends Amazon, Apple, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a Disclosure Policy.
3 Top Artificial Intelligence Stocks to Buy in June was originally published by The Motley Fool.