Amazon Poised to Outperform Tech Giants in AI-Driven Future

Nvidia (NASDAQ: NVDA), Apple (NASDAQ: AAPL), and Microsoft (NASDAQ: MSFT) currently represent the three most valuable stocks globally, boasting market caps exceeding $3 trillion. These tech giants are well-positioned to gain from advancements in artificial intelligence (AI), significantly enhancing their products and services.

Despite their strong performance, there are doubts regarding their long-term dominance over the next five years. Predictions suggest that Amazon (NASDAQ: AMZN) could eclipse them in market value.

AI: A Path to Growth for Amazon

Amazon is already a massive player in the market, valued at over $2 trillion. The company is exploring numerous AI-related avenues that could further enhance its worth:

• Amazon is launching Alexa+, an AI-enhanced version of its virtual assistant, priced at $19.99 per month for non-Prime members.
• The company has invested billions into Anthropic, a notable competitor to ChatGPT.
• Amazon plans to allocate over $100 billion towards data centers over the next decade.
• Its subsidiary, Zoox, is developing robotaxi technology capable of driving up to 45 miles per hour even in the dark and light rain.
• The firm is producing its own AI chips, which have already been utilized by Apple.

With nearly $33 billion in free cash flow last year, Amazon has substantial resources to invest in AI. This could yield significant returns as the technology enhances its online marketplace and expands into innovative sectors like robotaxis. Given its current valuation, the company may have more to gain from AI than the competitors that currently outpace it.

Challenges for the Current Leaders

Although Amazon shows notable growth potential, it may need some missteps from the top three companies for this to happen. Here are several reasons why those challenges may arise:

• Microsoft’s Copilot initiative has faced criticism, with Salesforce’s Marc Benioff likening it to the outdated Clippy assistant. While integrated into its office applications, it has not yet served as a significant growth driver. Last quarter, Microsoft’s sales increased by just 13%.
• Apple has stumbled in AI, delaying the rollout of Apple Intelligence and generating frustration among analysts and customers. With diminished focus on innovation and recent setbacks, such as abandoning its electric car project and scaling back on the Vision Pro headset, there are questions about its future in AI.
• Nvidia continues to perform well, but competition is intensifying. Rivals like Advanced Micro Devices have recently demonstrated strong performance, signaling that Nvidia may face serious competition ahead. Additionally, as Amazon and others begin producing custom chips, Nvidia’s premium pricing may attract scrutiny.

Amazon: A Compelling Long-Term Investment

Long before AI became the latest market buzzword, Amazon was actively exploring automation and next-gen technologies to streamline its operations. With numerous avenues to capitalize on AI growth, it is plausible that Amazon will become the most valuable stock in the world within the next five years. As it stands, Amazon represents a solid growth opportunity for investors.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Apple, Microsoft, Nvidia, and Salesforce. The Motley Fool recommends options relating to Microsoft. The Motley Fool has a disclosure policy.

The views expressed here are those of the author and do not necessarily reflect those of Nasdaq, Inc.