Following the recent market pullback, many investors are likely looking for oversold stocks with long-term growth stories on their watchlists. Two popular companies with clear secular tailwinds that were hit particularly hard in early 2026 are: tesla (TSLA 2.56%) and Amazon (AMZN +0.16%). Both companies have invested heavily in artificial intelligence (AI) and are well positioned to benefit from its continued adoption.
Down about 12% and 10%, respectively, year-to-date at the time of writing, these stocks offer investors a way to consider investing in AI themes.
But should you buy Tesla on the downturn, or is Amazon a better choice?
Image source: Motley Fool.
Tesla: AI hardware migration
When Tesla recently announced its fourth quarter results, it reminded investors that it is undergoing a transition from a traditional automaker to a physical AI company. Management highlighted the company’s advances in physical AI, noting that its active fully self-driving (supervised) subscriber base grew 38% year-over-year to 1.1 million during the same period. The electric vehicle maker began removing safety monitors from its Austin robotaxis, the self-driving vehicles in its early ride-sharing service, in January.
Of course, the problem for Tesla isn’t its ambitious vision for autonomous driving. This is the current state of the core automobile business.
Tesla’s total auto revenue for the fourth quarter fell 11% from a year earlier to $17.7 billion. Furthermore, the company’s overall operating profit margin declined from 6.2% in the same period of the previous year to 5.7%.
Today’s changes
(-2.56%) $-10.32
current price
$393.00
Key data points
Market capitalization
$1.5 trillion
daily range
$385.43 -$396.32
52 week range
$214.25 – $498.83
volume
3.2M
average volume
66M
gross profit
18.03%
Still, it’s worth noting that the company continues to generate significant amounts of cash. Tesla’s free cash flow (net cash provided by operating activities less capital expenditures) was a solid $1.4 billion in the quarter (though it was down significantly from about $2 billion a year earlier).
Additionally, Tesla expanded its energy storage deployment to record levels for the year, helping drive energy generation and storage revenue to $3.8 billion in the fourth quarter, up 25% year-over-year.
Amazon: A leading diversified AI company
Meanwhile, Amazon’s core businesses have great momentum. The e-commerce and cloud computing specialist had net sales of $213.4 billion in the fourth quarter, up 14% year over year and 12% excluding favorable exchange rates. Even better, the company’s lucrative Amazon Web Services (AWS) division is experiencing rapid adoption. AWS revenue increased 24% year over year to $35.6 billion, accounting for approximately 17% of total revenue.
This top-line strength translated directly into strong profitability.
Amazon’s overall operating profit for the quarter rose 18% from a year earlier to $25 billion. Management’s continued focus on efficiency across the North American fulfillment network is clearly paying off.
Today’s changes
(0.16%) $0.34
current price
$208.73
Key data points
Market capitalization
$2.2 trillion
daily range
$202.48 – $209.18
52 week range
$161.38 – $258.60
volume
43M
average volume
48M
gross profit
50.29%
Additionally, Amazon is actively leveraging the massive innovations brought about by AI, not only through Amazon Web Services but also through its chip business. The company’s proprietary custom chips, particularly its Trainium2 and Graviton architectures, are driving massive scale and now have an annual revenue run rate of over $10 billion.
And management is optimistic about the start of 2026. Amazon’s first-quarter outlook calls for net sales between $173.5 billion and $178.5 billion. This represents approximately 13% year-over-year growth at the midpoint.
It’s better to buy
These are both great businesses that are growing rapidly. But today, one stock is clearly the better option.
If you compare the two stocks, Amazon probably wins. Trading at a P/E of around 29x, the company’s stock looks much more attractively priced than Tesla’s stock, especially considering Amazon’s strong and broad momentum across e-commerce, digital subscriptions, cloud computing, and advertising.
However, Tesla trades at a high price-to-earnings ratio of approximately 360 times as of this writing. At this price, the market has probably already priced in the success of the rapid deployment of self-driving ride-sharing networks, leaving little margin for error.
Amazon is giving investors access to strong growth in its existing business, not to mention a much more attractive valuation for the stock, as well as the huge growth potential of its large cloud computing investments.
Of course, investing in Amazon is not without risk. For example, a weak macroeconomic environment can affect multiple parts of a business simultaneously. Declining discretionary spending could weigh on both the retail and advertising sectors, and an uncertain business environment could impact enterprise cloud spending. And of course, the company faces regulatory risks given its massive size. Finally, a surge in capital spending to support AI infrastructure could weigh on free cash flow in the near term.
Still, I like Amazon stock overall and think its valuation reflects far more risk than Tesla stock.
