The ongoing evolution of artificial intelligence (AI) has significantly impacted the landscape of technology stocks, particularly the ensemble known as the Magnificent Seven, which includes industry giants such as Meta Platforms, Apple, Amazon, Alphabet, Microsoft, Nvidia, and Tesla. These companies have emerged as frontrunners due to their established expertise in earlier AI technologies, but among this elite group, Nvidia stands out as a primary benefactor, especially with its innovations in the field of graphics processing units (GPUs).
Nvidia has become synonymous with AI, commanding a staggering 92% share of the data center GPU market, according to IoT Analytics. This dominance has positioned the company favorably as most AI processing occurs in cloud-based data centers. Nvidia’s consistent rollout of cutting-edge AI processors reinforces its competitive edge, indicating that it has no intention of relinquishing its market leadership.
However, the competitive landscape is shifting. Recent collaborations in the AI sphere—such as Advanced Micro Devices’ strategic agreement with OpenAI and Broadcom’s endeavors—show that even industry heavyweights are diversifying their portfolios and not solely relying on Nvidia. Despite these emerging threats, Nvidia’s remarkable stock performance, having soared over 1,150% since early 2023, could make it challenging for the company to maintain that level of growth moving forward.
In stark contrast, Amazon is carving out its own path in the AI revolution, extending beyond mere retail to become a multifaceted powerhouse in technology. The company has long leveraged sophisticated algorithms to optimize inventory management and delivery logistics, and generative AI is enhancing these capabilities exponentially. Additionally, Amazon’s burgeoning digital advertising segment stands to gain significantly from AI-driven insights, enabling more targeted ad placements. The crown jewel of Amazon’s technological offerings, Amazon Web Services (AWS), continues to thrive, utilizing generative AI tools to support its vast customer base.
Financially, Amazon’s recent performance further highlights its trajectory. In the second quarter, the company recorded a 13% year-over-year sales growth, reaching $167 billion, and a 33% increase in earnings per share, climbing to $1.68. Particularly impressive was the 18% growth in AWS, amounting to $31 billion, and a 23% rise in advertising revenue, approaching $16 billion.
CEO Andy Jassy recently stated that Amazon is currently developing over “1,000 generative AI services and applications,” emphasizing the vast potential of this technology across the organization. This vision for AI agents represents an ambitious frontier for the company, promising fresh avenues of growth.
Despite this potential, Amazon’s stock trades at a valuation of just 33 times its trailing earnings—less than half its three-year average and only slightly above the S&P 500’s multiple. With a decade-long return of 656%, compared to the S&P 500’s 231%, it appears that Amazon is well-positioned for future growth. Given its diverse business model, long-standing success, and attractive valuation, analysts believe that Amazon is poised to offer greater upside in the next decade compared to Nvidia, marking it as a strong contender in the evolving AI landscape.
