For almost a year, Nvidia and Microsoft have been swapping locations for the world's most valuable company.
Semiconductor Powerhouse for about a year nvidia The giant of cloud computing Microsoft We exchange locations for the most valuable companies in the world. But as Nvidia approaches the coveted $4 trillion milestone, it may seem that the company is leaving its “epic seven” buddies in the dust.
Nvidia currently holds the most valuable company title, but I think it's an e-commerce and cloud infrastructure specialist Amazon (amzn 1.26%)) It has a better shot to become a large company in the long run.
Explore the various ways Amazon is already using AI across its business. Let us also elaborate on why our robust growth outlook will lead to significant expansion over the next five years.
How can AI guide Amazon's new wave of growth?
Amazon's ecosystem spans ecommerce, logistics, consumer electronics, cloud computing, advertising, streaming, and more. While AI has the potential to add value to each of these services, I think investors should rely on how technology can drive significant growth, especially across the cloud and e-commerce segment.
Amazon pulls out a majority of its revenue from online sales, generating a whopping $250 billion last year. Factors such as commoditized product offerings, expensive transportation infrastructure on a global scale, and fluctuating shopping patterns from consumers make e-commerce business a relatively low margin business for Amazon.
Management has expressed its intention to make this area of its business more profitable by leveraging AI-powered robotics. Robotics can be integrated into Amazon warehouses that help automate common tasks along with the human workforce. Additionally, CEO Andy Jassy has even said that the robots can help transport and package delivery on the streets.
According to recent analysis from Morgan Stanley,Robotics helps reduce costs by 25% in individual warehouses. Given that Amazon has a global reach, these cost savings could potentially increase the profitability of e-commerce operations in the long run.
In terms of cloud business, Amazon has invested $8 billion in startups known as humanity in recent years. Anthropic's services are rapidly integrated into Amazon Web Services (AWS), and the impact on business sales and profitability is already very important.
Image source: Amazon Investor Relations.
Why Amazon's ratings are poised to expand over Nvidia and Microsoft over the long term
For most of the past few years, Nvidia's graphics processing units (GPUs) have been considered the gold standard for generating AI development. And while many of the seven epic companies are Nvidia's biggest customers today, these dynamics could change in the coming years.
Nvidia and Microsoft are currently rated at premium, but I think both companies could struggle to dodge the competition in chips and cloud arenas.
AMZN PE ratio (forward) data by YCHARTS
Given the ChatGpt manufacturers are exploring partnership opportunities, Microsoft's partnership with Openai may not be as advantageous as it once was. alphabet and Oracle recently.
Additionally, Amazon, Microsoft, and Alphabet all invest important capital in their own custom silicon development. moreover, Advanced Micro Devices We have built a scary data center and AI chip business that competes directly with NVIDIA.
Amazon appears to have witnessed some degree of expansion based on the forward price (P/E) trends depicted above. For me, this suggests that investors may ultimately understand that Amazon is positioned independently to further monetize its various service offerings by increasing its ecosystem with AI.
Therefore, as AI becomes the core pillar of supporting Amazon's transformation, the company's market capitalization could rise significantly in the following year compared to its peers.
Image source: Getty Images.
Are you buying Amazon stock now?
Amazon stocks are no bargains now, but I see them as a compelling opportunity for long-term investors to shop and hold. I don't think the benefits of AI have been completely burned to stock prices despite noticeable expansion in recent months.
Given the long-term impact that AI can generate for Amazon's core e-commerce and cloud businesses, I think the company is in the early stages of a new growth chapter that will drive revenue and profits over the next few years.
For this reason, I think investors continue to value Amazon at premium compared to their colleagues, and by the next decade ago it has emerged as the world's most valuable business than its AI peers.
Suzanne Frey, an executive at Alphabet, is a member of the board of directors of Motley Fool. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of Motley Fool's board of directors. Adam Spatacco has positions for Alphabet, Amazon, Microsoft, and Nvidia. Motley Fools introduces and recommends advanced microdevices: Alphabet, Amazon, Microsoft, Nvidia, and Oracle. Motley Fool recommends the following options: A $395 phone at Microsoft for January 2026 length and a $405 phone to Microsoft for January 2026 short term. Motley Fools have a disclosure policy.
