Microsoft has become the most valuable company in the world, with a market capitalization of over $3 trillion, largely driven by the proliferation of artificial intelligence (AI). The company’s stock has risen by more than 72% since the beginning of the AI revolution in 2023, matching the performance of the Nasdaq-100 Technology Sector index. Microsoft has capitalized on its partnership with OpenAI and offers a variety of AI-focused solutions across its software portfolio, leading to growth in sectors such as cloud computing. Analysts predict that AI could add $100 billion to Microsoft’s annual revenue by 2027, contributing to a 17% boost in its top line over the next three years.
Amazon, the sixth-largest company globally with a market capitalization of $1.9 trillion, has also been embracing AI technologies in its e-commerce and cloud computing operations. The company is enhancing its cloud computing division, Amazon Web Services (AWS), by providing a wide range of compute instances, including AI chips for training and deploying AI models. Amazon’s integration of AI tools into its platform aims to capitalize on the growing demand for AI services in the cloud, which is projected to generate $887 billion in annual revenue by 2032. Additionally, Amazon is leveraging generative AI to simplify product page creation for sellers and improve product discovery for customers on its e-commerce platform.
Analysts expect Amazon to achieve a healthy annual earnings growth rate of 30% over the next five years, driven by its AI initiatives across various business segments. If Amazon maintains its current forward earnings multiple, its stock price could increase by 158% in five years, leading to a market capitalization of $4.9 trillion. On the other hand, Microsoft’s projected earnings growth rate of 16% may result in a stock price jump of 43% over the same period, reaching a market capitalization of $4.4 trillion. As a result, there is a possibility that Amazon could surpass Microsoft in market capitalization within five years, making it an attractive AI stock for long-term gains.
Investors considering Amazon as an AI stock investment should weigh the company’s growth potential against other top-performing stocks. While Amazon could see significant growth in the AI space, there are other AI stocks expected to deliver faster growth rates over the next five years. The Motley Fool’s Stock Advisor team has identified the top 10 stocks poised for strong returns, with Nvidia being an example of a stock that produced massive gains after being recommended by the team. By evaluating the growth prospects of different AI stocks, investors can make informed decisions about their investment strategies for maximizing returns in the rapidly evolving tech industry.
