Cloud computing has made it easier and more cost effective for companies to store data online. Businesses no longer have to invest in physical servers and storage space to operate smoothly. 

Many tech giant have rolled out cloud platforms over the years, and other companies specialize in keeping those platforms protected. Many cloud computing stocks have delivered exceptional returns over the years, as scalability allows margins to expand rapidly once it becomes profitable. 

Cloud computing has been hot for several years, but artificial intelligence is adding more fuel to the fire. Artificial intelligence requires significant computing power and data storage capabilities. Cloud platforms help to enable many AI tools and give corporations the opportunity to use this innovative technology. 

Artificial intelligence is part of the reason that the cloud computing market is projected to maintain a compounded annual growth rate of 16.40% through 2029. These cloud computing stocks are positioned to benefit immensely from AI tailwinds.

Amazon (AMZN)

Amazon (NASDAQ:AMZN) is the largest cloud computing provider in the industry. Amazon Web Services has almost one-third of the market. The company is also working on a ChatGPT alternative to expand its reach in the AI market.

The tech giant’s overall sales increased by 13% year-over-year to reach $143.3 billion in the first quarter. Those sales include Amazon’s online marketplace which has helped the company expand into numerous industries. Amazon Web Services notably grew at a faster rate — 17% year-over-year — to reach $25.0 billion. 

Amazon stock has been on a tear. It’s up by 29% year-to-date and has roughly doubled over the past five years. The stock is approaching a $2 trillion market cap and has a 54 P/E ratio. Amazon has several segments that stretch beyond cloud computing. It also offers exposure to groceries, advertising, streaming, gaming and other verticals. Amazon is currently rated as a “Strong Buy” with a projected 18% upside from current levels.

ServiceNow (NOW)

ServiceNow (NYSE:NOW) has delivered a 167% gain over the past five years for patient investors. While those returns are quite good, Wall Street analysts believe that the stock can march higher. The cloud computing company is currently rated as a “Strong Buy.” The average price target indicates that the company can gain an additional 15% from current levels.

Most of the company’s revenue is recurring, which offers a good baseline for rising revenue. ServiceNow exceeded guidance in the first quarter by reporting $2.6 billion in revenue. That’s a 24% year-over-year increase. More than $2.5 billion of the company’s Q1 revenue was recurring. 

ServiceNow enables digital workflows and helps companies become more efficient. Customers have been flocking to the Now Platform and they’re also paying a lot of money.

The company closed eight new transactions with annual contract values above $8 million in the first quarter. It has more than 8,100 customers and a 98% renewal rate. Almost 2,000 of the firm’s customers have annual contract values that are greater than $1 million.

Alphabet (GOOG, GOOGL)

Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is the third largest cloud platform and has been growing at a faster pace than Amazon. While AWS reported 17% year-over-year revenue growth, Google Cloud’s revenue increased by 28.4% year-over-year to reach $9.57 billion.

That’s not the only highlight from Alphabet’s first quarter results. Overall revenue increased by 15% year-over-year while net income surged by 57% year-over-year.

Net income growth is a big highlight, since it prompted the tech conglomerate to offer its first quarterly dividend of $0.20 per share. Alphabet reported a 29.4% net profit margin to close out the quarter, and if cost cutting measures continue, the firm can end up with elevated gains in the future. 

Alphabet still trades at a reasonable 28 P/E ratio. It’s the online advertising leader and also one of the leaders in cloud computing and artificial intelligence. Wall Street analysts believe that Alphabet shares can gain an additional 9% from current levels.

Oracle (ORCL)

Oracle (NYSE:ORCL) offers hardware and software products, but its software segment has been the main growth driver. Cloud services and license support made up 72% of the firm’s revenue in the fourth quarter of fiscal 2024. This segment increased by 9% year-over-year while Oracle’s other segments reported slight year-over-year declines. 

Cloud computing is the defining element of Oracle’s investment thesis. Q4 cloud revenue — IaaS and SaaS — increased by 20% year-over-year to reach $5.3 billion. Overall revenue only inched up by 3% year-over-year to reach $14.3 billion.

Artificial intelligence tailwinds should help Oracle’s cloud platform generate a higher percentage of total revenue. This development should result in growth acceleration since the lagging segments won’t have as much of an impact.

Oracle shares are up by 36% year-to-date and have gained 138% over the past five years. The stock trades at a 38 P/E ratio and offers a 1.13% yield.

Microsoft (MSFT)

Microsoft (NASDAQ:MSFT) has been winning Wall Street analysts for many years. The stock is currently rated as a “Strong Buy” and has a projected 11% upside. Long-term momentum has played a role in bullishness. Shares are up by 21% year-to-date and have gained 226% over the past five years. 

The tech conglomerate offers exposure to many industries: artificial intelligence, advertising, gaming, business software, social media and others. However, none of those segments are as important as Microsoft Cloud.

The company’s cloud platform generated $35.1 billion in Q3 FY24 revenue, which is a 23% improvement compared to the same quarter last year. Microsoft also reported 17% year-over-year revenue growth across the board and grew its net income by 20% year-over-year.

Microsoft Copilot allows the company to expand into numerous industries and presents a compelling long-term opportunity. Copilot is slowly being integrated across Microsoft’s software products like LinkedIn and other places.

Copilot also has a cybersecurity division that should increase Microsoft’s presence in that vertical. Artificial intelligence and cloud computing both present long-term growth opportunities for Microsoft.

Crowdstrike (CRWD)

Crowdstrike (NASDAQ:CRWD) makes cloud computing safer with its Falcon Platform. Businesses can detect and address threats before they get serious and fortify their digital defenses.

Cloud platforms make it easier to store data and access digital files. While this is a boon for many businesses, putting everything on the web also makes it a target for hackers.

Cybercriminals attempt to infiltrate databases and access sensitive information about customers, people within the company and corporate assets

As such, the cybersecurity firm generates plenty of revenue. Q1 FY25 revenue came in at $921.0 million, which is a 33% year-over-year increase. Crowdstrike’s $3.65 billion in annual recurring revenue should support additional growth in the upcoming quarters. Net income came in at $42.8 million compared to a $0.5 million profit in the same quarter last year.

The stock has comfortably outperformed the market. Crowdstrike shares are up by 55% year-to-date and have gained 470% over the past five years. 

IBM (IBM)

IBM (NYSE:IBM) has been reinventing itself for several years. After a lot of hard work, the company now finds itself in the center of cloud computing and artificial intelligence.

Unlike most cloud computing stocks, IBM still has a reasonable valuation. Shares trade at a 19.6 P/E ratio and offer a 3.85% yield. The stock has gained 28% over the past year. 

Wall Street analysts have rated the stock as a “Moderate Buy” and are projecting a 6% upside from current levels. The highest price target of $215 per share suggests that IBM can gain an additional 24%.

IBM reported 1% year-over-year revenue growth and 69% year-over-year net income growth in the first quarter. Rising profit margins make the stock look more attractive, and the firm is also in the process of acquiring HashiCorp (NASDAQ:HCP) for $6.4 billion. This acquisition will expand IBM’s hybrid cloud market share and position it to benefit more from AI tailwinds. 

On this date of publication, Marc Guberti held long positions in AMZN, NOW, GOOG, MSFT and CRWD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.