Got $1,000? 2 Growth Stocks Building the Software Backbone of Artificial Intelligence. - Yahoo Finance

Companies that provide infrastructure for artificial intelligence (AI) are getting a lot of attention right now because tech companies are expected to spend an estimated $1.3 trillion on AI infrastructure next year alone.

And while that's certainly fueling share price gains for some companies, the main driver of demand for such hardware is the advancement of AI software and models.

Missed AI's "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we're only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »

Two growth stocks that are at the forefront of AI software are Microsoft (NASDAQ: MSFT) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). Here's why it's worth putting $1,000 toward these stocks right now.

Microsoft's early AI lead is already paying off

Microsoft was an early investor in OpenAI and benefited from early access to ChatGPT and the ability to integrate the chatbot into many of its business software products. And although Microsoft doesn't have the same exclusivity with ChatGPT as it once did, it is a leading AI software company more than ever.

The latest example of this is the company's new Copilot app, which is an AI hub to help workers and consumers be more productive. Copilot can be downloaded to your desktop and includes an AI agent called Autopilot, Code for programming, Cowork for getting tasks done, and AI-powered Office apps all in one place. Microsoft calls it "your new OS for work."

The company is betting that it can build AI services on top of its solid enterprise software foundation. Even before the new Copilot app was launched, Microsoft already had 30 million paid Copilot subscribers, a 50% increase from just a few months earlier.

Copilot is a crucial new piece of the company's expanding AI menu, which includes its increasingly important Azure AI cloud computing business. By offering more advanced AI software to its customers, management will likely not only increase its paid Copilot subscriptions but also its AI cloud sales.

Many of its business customers use Azure for their cloud needs because it integrates easily with their existing software. In its fiscal 2026 fourth quarter ended June 30, Azure AI cloud revenue reached an annual run rate of $100 billion. Reaching that milestone means that Microsoft AI services are resonating with customers and that they are already a success.