Gabelli Funds highlights the AI stocks to buy as craze continues

The nascent trillion-dollar investment cycle into generative AI infrastructure, projected to see major tech firms like Alphabet, Amazon, Meta, and Microsoft collectively spend $320 billion in 2025, is already yielding returns, according to Gabelli Funds' John Belton. Belton asserts that AI's decreasing costs and expanding capabilities are driving significant corporate productivity gains and labor replacement across various sectors, with early infrastructure investors realizing attractive returns. This bullish outlook is underscored by the outperformance of his Gabelli Growth Fund, which holds substantial exposure to leading AI players.

Analysis

A trillion-dollar capital expenditure cycle into generative AI is in its early stages and is already demonstrating tangible returns, according to Gabelli Funds portfolio manager John Belton. Major technology firms including Alphabet, Amazon, Meta, and Microsoft are projected to collectively invest up to $320 billion in AI infrastructure in 2025 alone. Despite investor concerns about the return on such massive outlays, the analysis suggests these fears may be premature. Early beneficiaries are the largest infrastructure investors themselves, with Meta already leveraging AI to boost sales via targeted advertising, and both Alphabet and Microsoft internally generating roughly 30% of their databases with AI. The investment thesis is supported by two key dynamics: the decreasing cost of AI technology and its simultaneous increase in capabilities, which is expanding corporate use cases from supply chain optimization to labor replacement. This trend is exemplified by ServiceNow, where agentic AI technology revenue is already tracking toward 10% for next year, and semiconductor firm Broadcom, whose stock is up over 16% year-to-date. The outperformance of the Gabelli Growth Fund, which is heavily weighted in AI leaders and ranks in the top 12% of its category, provides further evidence supporting this bullish outlook on the sector's long-term potential.

Key Decisions for Investors

• Investors should assess exposure to the primary AI infrastructure builders like Microsoft, Amazon, Alphabet, and Meta, as they are positioned as the earliest and most significant beneficiaries of the investment cycle.
• Consider opportunities in the broader AI ecosystem, including enterprise software providers like ServiceNow and semiconductor companies such as Broadcom, which are demonstrating direct revenue growth and stock performance tied to the theme.
• Monitor corporate adoption rates and reported ROI on AI spending, as the long-term thesis relies on the technology's ability to drive sustained productivity gains and create new revenue streams across various sectors.