Wall Street Favorites: 3 Cloud Computing Stocks With Strong Buy Ratings for May 2024

Stocks to buy

The stock market rebounded last week, igniting hopes of a sustained rally. However, in contrast to the previous AI-powered rally, the spotlight is now on recession-proof stocks. In this scenario, wagering on cloud computing stocks to buy on the dip will likely result in robust upside. 

Cloud computing has become a mission-critical service for businesses over the years. The technology enables companies to store vast amounts of data, increase productivity, and save a ton of money. Moreover, with the generative AI revolution in full motion, the significance of cloud computing companies becomes even more pronounced. Cloud computing firms provide the sturdy infrastructure necessary to operate AI applications. Here are the cloud computing stocks to buy: 

Cloud Computing Stocks to Buy: Amazon (AMZN)

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Amazon’s (NASDAQ:AMZN) cloud computing arm in Amazon Web Services (AWS) has been a revelation for its business. To put things in perspective, AWS generated $3.1 billion in 2013 to a dumbfounding $90.76 billion last year. Moreover, over the past several years, AWS has been arguably the fastest-growing segment for Amazon. Even in its most recent quarter, AWS revenues surged 17% on a year-over-year (YOY) basis, outpacing Amazon’s overall 13% growth. 

AI’s been huge for AWS, turbocharging the segment’s output and injecting new vitality into its operations. Not only has it resulted in an amazing influx of new customers, but it’s also providing existing customers with additional incentives to upgrade their accounts. Looking ahead, you can bet the house that AI will continue to be a major growth catalyst for AWS. 

Amazon recently invested another $2.5 billion in AI startup Anthropic, bringing its total investment to $4 billion. Anthropic currently leverages the power of AWS for its generative AI services and specialized chips.

Microsoft (MSFT)

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Microsoft (NASDAQ:MSFT) is another giant in the cloud computing realm, with a 25% market share in the niche. Like Amazon, Microsoft’s Azure has become a key growth engine for the company, solidifying its position as the second-largest cloud computing service after AWS.  Revenues from Azure have ballooned from $880 million in 2015 to upwards of $68 million last year. 

Over the years, Azure has carved out a substantial slice of Microsoft’s revenue pie. For instance, in its most recent quarterly results, sales have jumped 23% YOY to $35.1 billion. That’s more than 50% of the company’s sales generated during the quarter. These lofty numbers have plenty to do with the tech giant’s investments in AI and its spill-over effects on its software stack.

Furthermore, Azure offers multiple benefits over AWS, making it a highly attractive option for many enterprises worldwide. Azure is more cost-efficient for companies, especially those using Windows and SQL Servers. Moreover, thanks to its efficient integration capabilities, especially in hybrid cloud environments​​​​, you’ve got access to the company’s timeless software suite. Hence, it’s safe to say that Azure will continue driving a major chunk of MSFT’s future sales while catalyzing future stock price action.

Snowflake (SNOW)

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Snowflake (NYSE:SNOW) provides cloud-based data warehousing solutions, positioning itself as a juggernaut in its niche. It has operated a hyper-growth business, boasting a 5-year average revenue growth rate of 107%. Despite the normalization of pandemic-led tailwinds, analysts expect the company to continue growing by double-digit margins for the foreseeable future.

AI and machine learning will likely play a critical role in ushering in the next growth phase for its business. The firm’s investments in AI technology should help it capitalize on the growing demand for cloud-based data solutions. The technology effectively reshapes its cloud services through the Snowflake Cortex and partnerships with AI giants such as Nvidia. Cortex uses large language models (LLMs) to streamline the development of AI applications for users of all skill levels.

Cortex is not the only AI-powered service. Its Container Services enable customized user interfaces for AI apps within its ecosystem. These forward-looking efforts underscore Snowflake’s focus on making AI more accessible, positioning it for spectacular gains.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.

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