1 Artificial Intelligence (AI) Stock to Buy Before It Rises 74% to Join Nvidia as a $4 Billion Company
Amazon (NASDAQ: AMZN) it has a market capitalization of $2.3 trillion, and its stock price is up 44% over the past five years. Although the company’s valuation has still managed to soar over the past half-decade, the cloud-computing and e-commerce giant has the unenviable distinction of being one of only two “Magnificent Seven” companies to underperform. S&P 500a rate increase of about 80% during the extended period.
Microsoft is the only other Mag 7 stock lagging behind the benchmark index, and its nearly 78% share price gain over the period is only slightly behind the index. Currently, NvidiaThe stock is up 1,330% over the past five years. The technology company’s leadership position in advanced graphics processing units (GPUs) used for artificial intelligence (AI) processes has allowed its stock to post impressive gains.
Will AI create the world’s first trillionaire? Our team recently released a report on one little-known company, called “Indispensable Monopoly” that provides essential technology needed by both Nvidia and Intel. Continue »
The rise of AI has also played a major role in powering the market-beating gains of many Magnificent Seven stocks.
As many top tech companies see strong sales and earnings growth linked to AI, the underperformance of Amazon stock stands out. On the other hand, there are good reasons to bet against the stock continuing to be a laggard.
Read on to see why Amazon has 74% of manufacturing power and has joined Nvidia in the $4 trillion club.
By 2025, Amazon posted sales of $716.9 billion and surpassed Walmart to become the largest company in the world by profit. While Amazon generates much better profit margins than Walmart’s, its revenue generation rates relative to revenue come in much lower than most companies in the Magnificent Seven. The reason for the difference in margin compared to other technology leaders is that Amazon still generates most of its revenue from its e-commerce business, and online sales are a very expensive business.
While Amazon Web Services accounted for only 18% of revenue last year, it accounted for $45.6 billion of the company’s $80 billion operating income. The company’s cloud infrastructure division Amazon Web Services has already seen sales growth supported by rising demand for AI and should continue to boost earnings, but there could be better news for investors.
Amazon will likely be able to achieve better margins in its e-commerce business due to the emergence of AI and robotics technology. In addition to warehouse automation, the company will have opportunities to use self-driving cars and other delivery-related technologies to further reduce operating costs.
As the world’s largest company by revenue, Amazon’s large sales base provides the opportunity for significant revenue growth in tandem with cost reductions and margin improvements. While it’s unlikely that the e-commerce business will ever record margins approaching what AWS delivers, betting on significant margin improvements in online sales from AI and robotics over the next five years actually looks like a safe bet. The company is currently investing heavily to build the necessary infrastructure, but the market could quickly rebalance Amazon and put it on the path to a $4 billion market cap when significant margin improvements begin to occur.
Before buying stock on Amazon, consider the following:
I The Motley Fool Stock Advisor a team of analysts has just identified what they believe to be 10 best stocks for investors to buy now… and Amazon was not one of them. The 10 stocks that made the cut could produce huge gains in the coming years.
Think about when Netflix made this list on December 17, 2004… if you invested $1,000 during our recommendation, you will have $534,008!* Whenever Nvidia made this list on April 15, 2005… if you invested $1,000 during our recommendation, you will have $1,090,073!*
Now, it’s worth noting Stock Advisor’s the average total return is 949% – outperformed the market by 190% for the S&P 500. Don’t miss the latest top 10 list, available via Stock Advisorand join an investment community built by individual investors for individual investors.
See 10 stocks »
*Stock Advisor returns from 8 March 2026.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Amazon, Microsoft, Nvidia, and Walmart. The Motley Fool has a policy of disclosure.
1 Artificial Intelligence (AI) Stocks to Buy Before the 74% Increase Joins Nvidia as a $4 Billion Company was originally published by The Motley Fool.
