The exponential growth of artificial intelligence (AI) in multiple sectors of the economy is expected to add trillions to the world's gross domestic product. Investors can already see this playing out, with top AI hardware and software companies reporting strong expansion in their businesses and their revenues over the past few years.
To help you profit from this opportunity, you might want to consider two stocks that are well-positioned to supply the growing need for AI infrastructure in the years to come. Here's why.
1. Nvidia
One of the best stocks to profit from the growing investment in AI technology is the leading supplier of graphics processing units (GPUs), Nvidia (NVDA -6.22%). Data centers need GPUs for AI training and inferencing. Nvidia sees a $1 trillion opportunity for its business, as data centers upgrade legacy computing systems to AI-optimized hardware.
AI is completely changing how businesses operate. Nvidia has called it the next industrial revolution, and the company is certainly growing like it. Nvidia's annual revenue has quadrupled over the last three years. Analysts expect the company to report $129 billion in total revenue for fiscal 2025 (ending in January), representing a year-over-year increase of 112%, according to Yahoo! Finance. Over 80% of its revenue is driven by demand for data center chips and networking products.
The $1 trillion opportunity represents annual spending on data center infrastructure of about $250 billion per year. However, the opportunity could be bigger, considering the expected growth in the number of data centers. McKinsey estimates that the demand for data center capacity could triple by 2030. This would significantly benefit Nvidia, which is estimated to control over 70% of the AI chip market.
The important thing about Nvidia is that it is rock-solid financially. Over the last four quarters, it generated $56 billion in free cash flow on $113 billion of revenue. The company can outspend competitors on GPU technology to maintain a steady cadence of new product launches to drive growth. Management noted on the last earnings call that demand for its upcoming Blackwell computing platform is "staggering."
While investors shouldn't expect Nvidia's revenue to continue doubling every year, it should remain a rewarding investment that compounds in value with the growth of the business.
2. Dell Technologies
The market for AI technology is so strong that it is propelling Dell Technologies (DELL -2.72%) back to growth stock status. About half of its business comes from sales of PCs, workstations, and branded peripherals, which have struggled to grow due to a weak PC market. The other half of Dell's business is booming, with strong demand for AI-optimized servers fueling growth in its infrastructure solutions group.
Dell's infrastructure business posted Q3 revenue growth of 34% compared to the year-ago quarter. Consistent with McKinsey's estimate for data center capacity to continue growing, the momentum in AI servers is not slowing down. Dell reported a strong AI server backlog of $4.5 billion, with its five-quarter pipeline growing 50% over the previous quarter!
Beyond selling a server, Dell offers several services that help pad the bottom line, including power management, cooling solutions, networking switches, and other maintenance and professional services. Management calls these add-on sales opportunities "profit pools," which should continue to benefit Dell's margins over time as it sells more servers. Analysts expect earnings to be up 10% for 2025 before accelerating to 20% in 2026.
A recovery in the PC market would obviously present another growth catalyst. The launch of AI PCs is anticipated to drive higher sales, especially from enterprise customers. The end of support for Windows 10 could create an upgrade cycle for PCs and fuel even stronger revenue growth for Dell.
Dell stock is trading at a reasonable valuation of 15 times this year's earnings estimate. It also offers a dividend yield of 1.5%, reflecting management's confidence in the long-term growth of the business. It seems like a solid buy just based on the AI server opportunity, with a PC recovery adding extra juice to the stock's upside potential.
