Microsoft, Alphabet And Meta's Raised AI Capex Outlook Could Benefit These JPMorgan Stock Picks

Microsoft Corp MSFT, Alphabet Inc GOOG GOOGL, and Meta Platforms Inc META have each made significant strides in cloud capital expenditure (capex) and artificial intelligence (AI) investments.

According to a JPMorgan research report, these actions bode well for AI-levered cloud service provider (CSP) companies: Arista Networks Inc ANET, Coherent Corp (COHR), Dell Technologies Inc DELL and Lumentum Holdings Inc LI.

The firm noted that alternative AI beneficiary picks include Flex Ltd. FLEX and Jabil Inc. JBL.

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Both Microsoft and Alphabet have reported substantial increases in their cloud capex, exceeding market expectations and focusing on expanding AI infrastructure.

The aggregate capex for both companies is more than 20% above consensus estimates, indicating a strong commitment to AI investment.

JPMorgan has reiterated its preference for AI-levered names, including Arista, Coherent, Dell, Lumentum, Flex and Jabil. These companies are expected to benefit from the increased investments in AI infrastructure by the top cloud service providers (CSPs).

And Microsoft, Alphabet, and Meta are expected to lead to a strong year for data center capex.

Industry growth forecasts for data center investments from the top CSPs are now tracking in the mid-teens range for 2024, up from previous expectations of around 10%.

This growth is expected to outpace the increase seen in 2023, although it will still be below the levels seen in 2022.

Bullish On AI Beneficiaries

The focus on AI infrastructure by these tech giants is seen as a positive sign for the AI sector as a whole. It should lead to significant gains for AI-levered stocks in the coming year.

Investors in artificial intelligence-focused ETFs such as the Global X Robotics & Artificial Intelligence ETF BOTZ, the Global X Artificial Intelligence & Technology ETF AIQ and the ROBO Global Robotics & Automation Index ETF ROBO should also see greener days ahead.

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