Microsoft Stock Leads 3 AI Infrastructure Picks Backed by Cloud and Chip Spending

Rising oil prices are feeding into higher government bond yields in Europe, which keeps borrowing costs in focus and makes cash feel comforting but limited. At the same time, companies linked to the ChatGPT and AI buildout keep pouring money into chips, software and cloud tools that run these models. This article highlights three AI Stocks screener ideas that may benefit from that spending and explains what to watch in each.

The three stocks below are just a small sample of the AI companies linked to the ChatGPT buildout, and the full screen surfaced 674 more businesses with equally compelling stories that are not covered here. To go straight to the broader opportunity set, use the Artificial Intelligence/ AI Stocks screener to identify, filter and analyze the highest conviction plays that match your own view of the AI theme.

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Microsoft (MSFT)

Microsoft is a global technology company best known for Windows, Office, Xbox and a broad cloud platform. Its strongest AI connection comes from Azure AI and the deep OpenAI partnership that powers services like Azure OpenAI and Microsoft 365 Copilot. The company generates about US$140b from Productivity and Business Processes, around US$138b from Intelligent Cloud and roughly US$54b from More Personal Computing, so AI and cloud sit within a large, diversified revenue base rather than dominating it. Microsoft’s market cap is about US$3.68t, which puts it among the largest listed companies worldwide.

Investors watching the ChatGPT and AI buildout may find Microsoft hard to ignore because it combines the Azure AI and OpenAI engine room with Microsoft 365 Copilot spread across millions of workers. Earnings quality appears strong, with high profit margins and returns on equity that indicate the heavy data center and AI chip spending is backed by cash generation rather than hope. The flip side is that the stock already reflects a premium valuation and recent insider selling, while regulators in the US, UK and Europe are examining how tightly Microsoft can tie AI and cloud to its productivity software. For investors who can tolerate those risks, the full AI story inside Microsoft extends beyond a single quarter of CapEx headlines.

Microsoft’s AI spending surge and premium valuation may be masking where the real leverage sits. Review the 3 key rewards and 1 important warning sign to see how one subtle warning sign could change the whole Copilot story.

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Microsoft and the other two stocks in this article are examples identified using our tools to filter for strong cash generation, AI exposure and solid balance sheets. Try our flexible Screener to combine your preferred metrics into a custom watchlist, or start with one of our curated Investing Ideas.

Cerebras Systems (CBRS)

Cerebras Systems is an AI infrastructure company that builds full rack AI compute platforms around its wafer scale engine, a single large chip engineered to handle the heavy lifting for large language models and generative AI. The business currently earns about US$681 million from semiconductors, reflecting a focused model where hardware is the main revenue source rather than a sideline to other products. With a market cap of roughly US$52.0b, Cerebras Systems is already a sizeable player in the race to supply compute power for the ChatGPT and AI revolution.

Investors looking for pure exposure to AI compute may see Cerebras Systems as one of the clearest ways to back the infrastructure behind ChatGPT style services. The company is tightly linked to large customers and capacity commitments, and its wafer scale architecture is built specifically to speed up inference for heavyweight models that strain traditional GPUs. At the same time, the stock is highly sensitive to funding conditions, insider selling and any wobble in demand from a small group of key partners. For investors who want to understand how that mix of powerful drivers and real risks could play out, Cerebras may warrant a closer look beyond the headlines about faster GPT models.

Cerebras Systems is racing to supply the racks that power heavyweight AI models, yet most attention stays on the biggest chip companies. Read the 2 key rewards and 2 important warning signs (1 is major!) to see how concentrated customers and wafer scale bets could reshape that story.

Alphabet (GOOGL)

Alphabet is the parent company behind Google Search, YouTube, Android and a wide range of consumer and business products, with most of its roughly US$367.1b in revenue coming from Google Services and about US$77.6b from Google Cloud. The strongest direct link to the AI theme is Google Cloud’s AI stack, where Vertex AI and the Gemini large language models run on Alphabet’s TPU and GPU infrastructure and are integrated into Workspace and Cloud APIs for enterprise customers, even though this is only one part of a much bigger group. With a market cap of about US$4,217.3b, Alphabet is one of the largest listed companies, using its ad and services cash engine to fund heavy AI infrastructure spending.

Investors watching the AI infrastructure race may see Alphabet as an unusual combination of cash rich ad giant and full stack AI platform provider. Google Cloud’s Vertex AI and Gemini services sit on a US$77.6b cloud business that is tied to a US$514b backlog and rising AI focused capex. At the same time, some investors may view the stock as being priced in a way that suggests the AI optionality may not be fully recognised. The flip side is heavy spending on data centers and custom chips, earnings forecasts that point to a modest decline over the next few years and ongoing regulatory pressure around data and ads. If you want exposure to AI models, infrastructure and enterprise tools in one ticker, Alphabet’s mix of Gemini, TPUs and YouTube makes the deeper story worth understanding.

Alphabet’s AI engine and US$514b backlog suggest a much bigger story than the headline ad business. Access the analyst forecasts for Alphabet to see where expectations may be stretching the story or missing something crucial.

Seeking Fresh Alternatives Before They Fly

Fresh stock ideas can move from quiet accumulation to full breakout before most investors notice. Scan these themes while they are still under the radar for now and consider them carefully.

• Target durable income plays by checking a curated mix of resilient high yield stocks through the 10 dividend fortresses before yields adjust as prices move.
• Hunt for potential long-term compounders by reviewing the hand picked 19 high quality undiscovered gems that remain under the radar for now but could attract momentum once the crowd pays attention.
• Consider the next infrastructure wave by tracking curated 39 power grid technology and infrastructure stocks that may gain traction as demand for grid upgrades develops and valuations change.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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