Key Points
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Alphabet is planning to spend $85 billion this year to meet growing demand for the cloud and other services.
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Amazon's AI investments drive profitable growth across your business.
The tech giant continues to announce more capital investments in artificial intelligence (AI) technologies. Demand continues to be strong from large companies seeking better insights from their data using AI-powered services in the cloud.
Two companies benefiting from these trends are alphabet(NASDAQ: GOOG)(NASDAQ: Google) and Amazon(NASDAQ: AMZN). These companies are in a strong competitive position to bring AI innovation to consumers and businesses, and even better, their stocks are reasonably valued compared to their earning potential.
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1. alphabet
Alphabet's stocks skyrocket in 2025 as investors began to recognize Google as an AI Juggernaut. Google's Gemini AI model promotes intelligent capabilities across all company services, including search, Google Cloud and other apps. Two billion people who use services like Google Search and Gmail every day make Google one of the top consumer brands that benefit from AI.
Google Search is having a strong year thanks to AI. Search revenues rose 12% year-on-year in the second quarter. New features such as AI Overview and AI Modes are driving new use cases for searches that are driving more search frequency and more advertising revenue.
On the enterprise side, Google Cloud is seeing huge demand for AI services. Companies are migrating their data to major cloud platforms to access AI-powered analytics and application building tools. This has resulted in cloud revenues up 32% year-on-year for the previous quarter, but more than doubled the segment's operating profit.
AI is bringing internal improvements to Google's operations, including automating over 30% of code. This frees up time for Google engineers to work on new ideas that can speed up product development. This could accelerate growth over the next decade, and this is not reflected in the stock valuation.
Management is expected to spend $85 billion in capital expenditures in 2025, up from previous estimates of $75 billion. This is to meet the growing demand for the cloud and other services by indicating that Google's future growth is underestimated.
Even after recent climbs, stocks are still trading at multiples of 23 (P/E) based on 2026 estimates. This is attractive for AI-first companies that should deliver double-digit annual revenue growth over the long term.
2. Amazon
Amazon is another high-tech juggernaut that is currently firmly adding to the investor portfolio. This year's financial results are solid, improving sales and profitability for our biggest business, e-commerce. However, Amazon is also a leading cloud service provider, raising billions of dollars in annual revenues from enterprise AI services.
Amazon Web Services (AWS) generates $116 billion in annual revenue. This accounts for 18% of the company's total revenue, but generates a large portion of the company's profits. AWS faces greater competitive pressure Microsoft Azure and Google Cloud continue to sign major deals with global brands. Last quarter, AWS signed a new agreement PepsiCo, Pelotonand Warner Bros Discoveryespecially.
The demand for AI is so strong that it is expanding AWS' computing capacity. Specifically, the Generator AI Solution has experienced three-digit growth year-over-year. This means AWS revenue could accelerate in 2026 as Amazon invests in providing more computing power online.
AI is also benefiting Amazon's e-commerce operations through more intelligent delivery routing, inventory placement and faster order processing, with over 1 million robots in its warehouse. While this shows a valuable synergistic effect that AI will improve the efficiency of the e-commerce business, the increase in revenue from e-commerce will help fund more investments in research and development for AI innovation in cloud services.
In many ways, Amazon has become an AI-first business, making it a solid option for investors looking for a relatively safe business that invests in AI for the long term.
The stock is trading at 30 forward P/E using estimates of revenue for next year. This makes sense for businesses that only just increased 33% year-on-year, driven in part by AI-driven cost-efficiency in e-commerce. Analysts expect the company to provide an annual revenue growth rate of 17%, allowing it to double its stock by 2030.
Should I invest $1,000 in the alphabet now?
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John Ballard has no position in any of the stocks mentioned. Motley Fool has joined and recommended Alphabet, Amazon, Microsoft, Peloton Interactive, and Warner Bros. Discovery. 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.
