AI Sales May Soar 600% by 2028: 2 Brilliant AI Stocks to Buy Now, According to Wall Street

Artificial intelligence capital spending is projected to add over a percentage point to U.S. economic growth in the first half of 2025, surpassing consumer spending, as Morgan Stanley forecasts AI sales to exceed $1 trillion annually by 2028. This transformative trend underpins a continued bull market, with Alphabet and Datadog identified as key investment plays. Alphabet, a leader in adtech and cloud, reported robust Q3 results driven by AI infrastructure demand, with analysts setting a median target price implying 19% upside. Datadog, an observability software provider leveraging AI for IT operations, also surpassed Q2 estimates, and analysts project a median 10% upside despite its current high valuation, reflecting strong growth prospects in the AI revolution.

Analysis

Artificial intelligence capital spending is projected to significantly bolster U.S. economic growth, contributing over a percentage point in the first half of 2025 and surpassing consumer spending as a primary driver. This aligns with Evercore's view of AI as a transformative technology and Morgan Stanley's forecast of AI sales in cloud and software exceeding $1 trillion annually by 2028, indicating a sustained bullish market trend.

Alphabet demonstrated robust financial performance in Q3, with revenue increasing 16% to $102 billion and GAAP earnings per share rising 35%, both exceeding estimates. The company's strategic focus on generative AI, leadership in cloud infrastructure, and strong demand for custom chips and Gemini models position it favorably within the expanding AI ecosystem, with a current valuation of 27 times earnings deemed reasonable.

Datadog, a leader in observability software, reported strong Q2 results with revenue up 28% to $827 million, driven by its AI engine Watchdog and new AI agents. Despite a high current valuation of 84 times earnings, the company's consistent earnings beats and leadership in AI for IT operations, as recognized by Forrester and Gartner, support its projected 19% annual adjusted earnings growth through 2028.

Key Decisions for Investors

• Consider strategic allocation to capitalize on the significant, long-term economic growth driven by AI capital spending.
• Evaluate Alphabet for its strong Q3 performance, strategic AI positioning in cloud and generative AI, and reasonable valuation, potentially initiating a small position.
• Monitor Datadog for its leadership in AI-driven observability and strong growth trajectory, while being cognizant of its premium valuation and considering potential entry points during market pullbacks.