Artificial intelligence (AI) is the biggest trend driving gains in the stock market since the start of the current bull market in October 2022. Companies have collectively added trillions of dollars to their market capitalizations thanks to massive growth in spending on AI and artificial generative opportunities. intelligence is unlocked. But the rise of AI may still have a long way to go.
Generative AI cloud infrastructure could grow to a $470 billion market by 2032, growing at an average rate of 30% from 2022, according to Bloomberg Intelligence forecasts. Meanwhile, analysts expect spending on software for things like specialized AI assistants and workflow improvements to grow 71% annually to a combined $318 billion.
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High growth expectations across the tech industry have caused some stock prices to soar, but there are still plenty of opportunities for investors. With just $500, you could buy any of the following stocks at a more than fair price. As AI spending continues to rise, all of these stocks should benefit.
microsoft‘s (NASDAQ:MSFT) The initial investment in generative AI pioneer OpenAI put it in an excellent position to capitalize on the growth in AI spending for both its cloud infrastructure and enterprise software.
The company’s Azure AI service gives developers access to large, leading language models, including GPT-4o, in its cloud infrastructure. It has more than 60,000 customers for the service, a 60% year-over-year increase in the most recent quarter.
Management also notes that the average customer is also spending more. That helped drive Azure revenue to 33% year-over-year growth.
Management believes it has much more growth ahead. It forecasts accelerated revenue growth for Azure as more of its 2024 capital investments come online and adds more capacity to meet growing demand for its AI cloud infrastructure services.
Meanwhile, Microsoft’s AI agent, Copilot, is seeing strong adoption across its enterprise software suite. Its Github Copilot, which helps software developers write code and improve workflows, is the most widely adopted AI development tool. It pushed Github to a $2 billion revenue rate last quarter.
Microsoft has since adapted Copilot for general knowledge work in Microsoft 365 and has seen rapid adoption. The number of people using it daily doubled sequentially last quarter.
Microsoft stock is trading at around 32 times analyst estimates for 2025 earnings, as of this writing. It’s certainly a premium price, but Microsoft has several factors supporting that level. Not only is it a leading AI company on two fronts, but it uses billions of dollars in free cash flow each quarter to buy back shares, making future earnings more valuable to shareholders in the long term. With the share price currently hovering around $420, there is still time to buy this AI giant.
Adobe(NASDAQ: ADBE) makes essential software for any digital creative. It’s the company behind Photoshop, Premiere Pro, and Illustrator, and it’s developing artificial intelligence models to help creatives who use its software get the most out of its tools.
Some investors worry that generative AI tools that can create images and videos could displace the need for some of Adobe’s software. But Adobe last month revealed several improvements to its generative AI model, Firefly, that indicate AI is more of a benefit to its business than a threat. Firefly video generation for Premiere Pro, for example, can create commercially safe edits and fills, saving filmmakers time and resources. They won’t have to reshoot an entire scene just to fix a small mistake.
Management is monetizing its AI capabilities by offering tiered subscription deals, add-ons that provide more access to AI tools, and direct access to AI with Firefly services for creatives and GenStudio for marketers.
Its free Adobe Express service also integrates its Firefly model to “enable creativity for everyone,” as management says. The free service acts as a funnel to attract new customers to Adobe’s software suite and is working well. Management says that leads who come through Express are best converted into paid subscribers.
Adobe stock is trading at less than 25 times analyst estimates for 2025 earnings, as of this writing. It’s a big price to pay for a company that should see steady revenue growth as customers pay for its AI tools. Growing scale thanks to its AI investments should also lead to modest margin expansion going forward, supporting strong profit growth. Your $500 is enough to buy a single share of this stalwart software provider that makes some of the best AI tools for your industry.
Many see the growth of artificial intelligence assistants like ChatGPT as a major threat to Alphabet‘s (NASDAQ:GOOG)(NASDAQ:GOOGL) core business of Google Search. But Alphabet is investing heavily in AI to make sure that’s not the case.
According to management, AI overviews at the top of Google Search results have led to higher engagement and satisfaction among users. Other AI-powered features, such as Circle to Search on Android phones and Google Lens, are also driving search traffic to Search.
This is important, because generative AI could have a significant impact on Google’s advertising business in the long term. Google’s artificial intelligence model is called Gemini and the company is incorporating it into almost all of its marketing tools. Gemini helps advertisers create and test hundreds of different ads with different copy or images.
Google’s AI tools also help marketers direct their advertising budgets toward higher-performing ads more quickly, maximizing their spend. Finally, Google’s AI tools can help measure conversion through predictive analytics now that many users block direct ad attribution on sites and apps.
Meanwhile, Google Cloud remains one of the largest public cloud providers and is benefiting greatly from the growth in AI infrastructure spending. Google Cloud revenue grew 35% in the third quarter, reaching $11.4 billion. The segment’s operating income grew to $1.9 billion, from $266 million last year, and it still has a long way to go to increase its margin, according to competitive results. This could lead to strong overall earnings growth in the coming years.
Alphabet shares trade at just 20.3 times analysts’ 2025 earnings estimates, as of this writing. With the potential growth of AI-powered marketing and spending on Google’s cloud infrastructure, it is well positioned to grow profits at a strong pace that more than justifies that price in the coming years.
Analysts currently expect Alphabet’s earnings to grow at an average rate of 22% annually over the next five years, making its current price multiple look like an absolute bargain. With $500, you could purchase several shares of Alphabet, giving you multiple ways to invest in the future of AI.
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Alphabet executive Suzanne Frey is a member of The Motley Fool’s board of directors. Adam Levy has positions at Adobe, Alphabet and Microsoft. The Motley Fool has positions and recommends Adobe, Alphabet and Microsoft. 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.
Three Obvious Artificial Intelligence (AI) Stocks to Buy with $500 Right Now was originally published by The Motley Fool
