Wall Street Analyst Predicts a $1.4 Trillion AI Boom in 2027: 3 Stocks to Buy Now

Artificial intelligence (AI) capital expenditures are on the rise, and Morgan Stanley thinks the final number could come in even stronger than expected. The market is currently forecasting AI infrastructure spending to reach $1.2 trillion next year, but the investment firm thinks that figure may be too low and that it could hit $1.4 trillion in 2027.

Morgan Stanley analyst Erik Woodring pointed to recent commentary from the big four hyperscalers -- Amazon, Microsoft, Alphabet, and Meta Platforms -- with all four companies talking about industry capacity constraints. Meanwhile, the big cloud computing providers have mentioned that demand continues to outstrip their capacity and that they plan to significantly increase their capex next year.

Let's look at three AI stocks to benefit from this massive spending.

Image source: Getty Images

1. Nvidia

Nvidia (NASDAQ: NVDA) remains one of the best ways to play the AI infrastructure buildout. The company continues to see rapid growth, while the stock is cheap, trading at a forward P/E of 17 times fiscal 2028 (ending January 2028) analyst estimates.

The company has a dominant position in the AI model training market with its graphics processing units (GPUs), and its CUDA software platform, where most foundational AI code was written on, helps cement its leadership here. It has also nicely positioned itself for inference through its acquisition of Groq and its language processing units (LPUs), which help reduce latency during the important decode phase of inference. Meanwhile, the company also developed high-end central processing units (CPUs), which are becoming increasingly important with agentic AI.

As the market leader, and following a recent pledge from SpaceX to exclusively use its chips, Nvidia is a stock you want to own, as AI data center spending continues to surge.

2. Advanced Micro Devices

While the company isn't a big player in AI model training, Advanced Micro Devices (NASDAQ: AMD) looks poised to grab some meaningful share in the inference market, which is the faster-growing of the two markets.

Inference is very memory-intensive, and AMD's chiplet design can be packaged with more memory. It's also partnered with Cerebras, where its more expensive, but faster, systems can handle the de-code phase. In addition, AMD's recent acquisitions of memory optimization company MEXT and chip start-up Taalas, which boosts inference performance by embedding models directly into the chips, really show AMD's desire to become a major inference player.

At the same time, AMD is the leader in the data center CPU space. With the rise of inference and agentic AI, data centers will need a much narrower ratio of GPUs to CPUs to handle these tasks. AMD sees this becoming a $220 billion market over the next few years, with it continuing to be the market leader.

With AMD riding two of the most powerful trends in AI that are just getting started, and the introduction of its Helios rack system that combines its GPUs, CPUs, and networking into one system, this is a stock to buy.

3. Micron

One of the biggest bottlenecks in AI right now is memory, especially high-bandwidth memory (HBM), which gets packaged with GPUs and other AI chips to reduce latency and optimize performance. This becomes even more important with inference. Right now, demand for HBM is off the charts, and capacity additions are unable to keep up with increasing demand.

This has been great news for the big three memory makers, as surging DRAM (dynamic random access memory) prices have led to huge gains in revenue and gross margins. Micron (NASDAQ: MU), though, is arguably the biggest beneficiary of near-term increased AI spending, although much of this will be indirect.

The reason Micron benefits the most is that Samsung is still a conglomerate, and while SK Hynix is the HBM leader, regular DRAM prices have actually surged more than HBM prices because increasing HBM capacity is the primary focus of these three companies.

Expect the DRAM market to remain incredibly tight next year and well beyond, which should help lift Micron's stock. The stock is cheap with a forward P/E of below 6 times fiscal 2027 (ending August 2027) estimates, as investors wait for a cyclical shift that looks like it will keep getting pushed back.

Geoffrey Seiler has positions in Advanced Micro Devices, Alphabet, Amazon, and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Micron Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.