AI Infrastructure Stocks to Watch: Three Strong Buys for 2025

Table of Contents

1. Key Highlights:
2. Introduction
3. The AI Infrastructure Landscape
4. The Surge in Capital Expenditures
5. Notable Stocks in AI Infrastructure
6. The Economic Context
7. The Future of AI Infrastructure
8. FAQ

Key Highlights:

• The AI infrastructure market is experiencing significant growth, with capital expenditures expected to reach $325 billion in 2025.
• Three AI infrastructure stocks—Credo Technology Group, Jabil Inc., and Lumentum Holdings—show strong upside potential with over 10% returns in the past month.
• The global sovereign AI market could be worth up to $1.5 trillion, indicating a robust demand for AI-related technologies across various sectors.

Introduction

The rapid advancement of artificial intelligence technology is reshaping industries and creating new investment opportunities. As companies increase their focus on AI infrastructure, the market is witnessing a surge in capital investments and stock performance. Recent developments, including easing economic concerns and positive signals from the Federal Reserve, have bolstered investor confidence. This article will delve into three AI infrastructure stocks poised for growth, alongside the broader trends in the AI market that underline their potential.

The AI Infrastructure Landscape

The past few years have illuminated the critical role of AI in various sectors, from healthcare to finance. The term "AI infrastructure" refers to the underlying technologies and frameworks that enable AI applications to function efficiently. This landscape includes hardware, software, and networks that support the processing and storage of vast amounts of data required for AI algorithms.

As businesses increasingly adopt AI technologies, the demand for robust infrastructure has skyrocketed. This trend is not merely a temporary surge; forecasts suggest that the total addressable market for sovereign AI could reach a staggering $1.5 trillion globally. The growing reliance on AI solutions signifies a substantial opportunity for investors willing to explore this burgeoning field.

The Surge in Capital Expenditures

In 2025, major players in the AI sector are expected to invest approximately $325 billion in capital expenditures aimed at enhancing AI infrastructure. This represents a remarkable 46% increase year-over-year. Companies often referred to as the "magnificent seven," which include tech giants committed to AI innovation, are leading this spending spree.

This influx of capital is poised to transform various sectors, including hyperscale automation, robotics, healthcare, energy, materials, financial services, and cybersecurity. As organizations strive to leverage AI for competitive advantage, the infrastructure that supports these technologies will be critical.

Notable Stocks in AI Infrastructure

Three stocks have recently emerged as promising investments in the AI infrastructure space, each displaying significant growth potential.

Credo Technology Group Holding Ltd. (CRDO)

Credo Technology specializes in high-performance serial connectivity solutions, crucial for data centers, 5G networks, and AI applications. Their flagship product line, Active Electrical Cables (AEC), is gaining traction due to its reliability, offering over 100 times improved performance compared to traditional laser-based optical solutions.

As the demand for AECs continues to increase, driven by the expansion of data center applications, Credo's innovative products position it well for future growth. The company is also diversifying its offerings, with plans to expand its Optical Digital Signal Processors (DSPs) across various customer segments and applications, further enhancing revenue potential.

Jabil Inc. (JBL)

Jabil is a global manufacturing services company that has increasingly focused on the tech and healthcare sectors. The company’s role in the AI infrastructure space is significant, as its manufacturing capabilities support a range of technologies essential for AI deployment.

Jabil’s investments in advanced manufacturing and supply chain solutions make it a critical player in meeting the growing demand for AI-enabled products. With a solid reputation for innovation and quality, Jabil is well-positioned to capitalize on the expanding AI infrastructure market.

Lumentum Holdings Inc. (LITE)

Lumentum is known for its optical and photonic products, which are integral to various AI applications, including data centers and telecommunications. The company’s technology enables faster data transmission and processing, essential for the performance of AI systems.

With the increasing demand for high-speed connectivity solutions, Lumentum’s growth trajectory appears promising. The company is not only focusing on enhancing its existing products but is also investing in research and development to pioneer new technologies that further support AI infrastructure.

The Economic Context

Several macroeconomic factors are contributing to the positive outlook for AI infrastructure investments. Recently, fears surrounding the DeepSeek-related issues have proven to be overblown, allowing market participants to regain confidence. Additionally, the Federal Reserve has indicated the possibility of two rate cuts this year, which can lead to lower borrowing costs and stimulate investment in technology sectors.

The evaporation of recession worries in the U.S. economy further supports a conducive environment for growth in AI infrastructure. As businesses feel more optimistic about their financial outlooks, they are more likely to invest in advanced technologies that enhance their operational efficiencies.

The Future of AI Infrastructure

The landscape of AI infrastructure is set for transformative changes in the coming years. With large-scale investments and a robust demand for AI solutions across multiple sectors, companies in this space are poised for significant growth. The increasing adoption of AI technologies will lead to innovations that will not only enhance productivity but also create new markets and opportunities.

As organizations explore the potential of AI, they must invest in the underlying infrastructure that supports these technologies. This critical investment will ensure that they remain competitive in an increasingly data-driven world.

FAQ

1. What is AI infrastructure? AI infrastructure refers to the hardware, software, and network systems that support the development and deployment of artificial intelligence applications. This includes data centers, servers, and connectivity solutions that enable processing and storage of large datasets.

2. Why is there a surge in capital expenditures for AI infrastructure? The surge in capital expenditures for AI infrastructure is driven by increasing demand for AI technologies across various sectors, as businesses seek to leverage AI for competitive advantage and operational efficiency.

3. Which companies are leading the AI infrastructure investments? Notable companies leading the investments in AI infrastructure include Credo Technology Group, Jabil Inc., and Lumentum Holdings, all of which show strong growth potential and are well-positioned in the AI market.

4. How does the economic climate impact AI infrastructure investments? A positive economic climate, characterized by low-interest rates and reduced recession fears, encourages businesses to invest in AI infrastructure, enhancing their capabilities and competitiveness.

5. What is the projected growth of the global AI market? Research indicates that the global sovereign AI market could reach approximately $1.5 trillion, reflecting the vast opportunities and demand for AI technologies across different industries.