Every significant advancement in AI is supported by the companies responsible for chip production, platform development, and system monitoring.
Artificial intelligence (AI) might be a major focus this decade, but savvy investors aren’t just looking at chatbot stocks. They are investing in the essential companies: the manufacturers producing the chips, the platforms utilizing the models, and the software keeping everything operational.
Picture AI as a vast construction endeavor. You require raw materials, skilled builders, and inspectors ensuring everything is stable. The market has been so focused on the designers’ blueprints that it has neglected the suppliers benefitting from every venture. Here are three companies well-positioned to profit regardless of which AI applications become prominent.
The Chip Powerhouse
Taiwan Semiconductor Manufacturing (TSM -0.71%) is pivotal in the AI supply chain. In the second quarter, revenue jumped by 39% year over year to $30.1 billion, with net income increasing by 61%.
Advanced process technologies under 7 nanometers now account for 60% of wafer revenue, rising from 52% the previous year—this transition enhances margins amid increasing demand for high-end chips.
The Platform Innovator
Meta Platforms (META 0.71%) has transformed AI from a buzzword into a profit generator. In the second quarter, revenue increased by 22% year over year to $47.5 billion, buoyed by AI-driven ad targeting that maximizes value per impression. The company is investing over $17 billion quarterly into AI infrastructure, enabled by its substantial free cash flow.
Meta’s advantage lies in its ability to monetize AI quickly. While competitors highlight the potential of AI, Meta is already reaping benefits through improved ad matching, smarter content suggestions, and heightened user engagement.
The Hidden Hero
Datadog (DDOG -0.61%) addresses the underlying complexity of AI. As companies implement numerous AI models across various clouds, there’s a growing need for performance monitoring, cost tracking, and outage prevention. Datadog’s observability platform specifically addresses this need, resulting in a 28% revenue increase to $827 million last quarter with $165 million in free cash flow.
The recurring revenue from critical services is particularly appealing. While companies might postpone AI initiatives, they cannot afford to neglect the monitoring of production systems.
Portfolio Strategy
For cautious investors, Taiwan Semiconductor offers the most straightforward exposure to the AI landscape: a dominant market position, improving margins, and a necessity for its chips. Meta offers a balanced opportunity with immediate AI monetization, supporting the hefty infrastructure costs. Datadog is ideal for growth-focused investors ready to invest in recurring software revenue linked to AI growth.
The optimal strategy might involve investing in all three. TSMC lays the foundational manufacturing groundwork, Meta develops the platforms, and Datadog ensures everything operates smoothly. Together, they encompass the AI value chain without relying on the success of a singular model or application.
In technological gold rushes, the most significant beneficiaries are often those providing the tools, knowledge, and infrastructure rather than those mining for gold. These three firms have strategically positioned themselves to profit from AI’s expansion, regardless of who ultimately strikes it rich.
George Budwell has holdings in Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has interests in and recommends Datadog, Intel, Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool suggests shorting November 2025 $21 puts on Intel. For further details, see the disclosure policy.
