Contemplating the tech landscape, the question pops up: Forget Nvidia’s towering dominance in the AI realm? With its triple-digit growth streak and glowing prospects, one may find it bewildering to cool towards the chip giant. However, the stifling valuation at 80 times earnings and 39 times sales can freeze over even the most zealous eye. For those steering clear, two alternatives from the Magnificent Seven beckon: the likes of Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Tesla.
Among them, perched on Wall Street’s pedestal like gleaming knights, stand Amazon and Microsoft, capturing investor hearts more ardently than even the celebrated Nvidia. Let’s delve into the realm of these AI titans to uncover the gems awaiting astute investors.
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Amazon: The E-Commerce Monarch in the AI Kingdom
Amazon, the reigning sovereign of online retail, boasts a staggering 38% market share in e-commerce, dwarfing its rivals. Fuelled by an economy on the upswing, Amazon’s fortunes are poised to soar higher in the foreseeable future. At the vanguard of cloud infrastructure through Amazon Web Services (AWS), the company not only pioneered the sector but continues to innovate rapidly to cater to the burgeoning demand for generative AI.
Let’s not overlook Amazon’s thriving digital advertising arm, climbing the ranks to become the third-largest player, hot on the heels of Google and Meta Platforms. With Prime Video now a platform for advertisements, revenue streams are bound to surge.
Surprisingly, Amazon claims the crown of Wall Street’s preference among the Magnificent Seven, inviting a chorus of buy ratings from 91% of analysts covering the stock. A refreshing break from Nvidia’s polarized reviews, emphasizing valuation apprehensions over growth prospects.
One might peg Mizuho’s James Lee as Amazon’s most ardent cheerleader, waving a buy flag with a $230 target, signaling 30% growth potential. Lee credits the uptick in AWS revenue and operational efficiencies propelling Amazon’s e-commerce wing for this bullish stance.
Amidst multiple growth drivers, Amazon stock beckons with a tantalizing valuation of less than 3 times forthcoming sales, making it a steal in the AI stock universe.
Microsoft: The Software Veteran Marching to the AI Tune
Microsoft, the torchbearer of the ubiquitous Windows OS and the esteemed Office suite, stands firm on its software fortress, primed to conquer new frontiers. Its Azure cloud service, poised as the second-largest player at 26% market share, witnessed a meteoric 30% year-over-year growth, toppling the likes of AWS and Google Cloud in the latest quarter.
Leading the charge into generative AI with its digital assistants, Microsoft has seen Azure demand surge. Noteworthy is the revelation that 6 percentage points of cloud growth in Q2 FY24 stemmed from the uptick in AI service demand.
The accolades from Wall Street adorn Microsoft’s shoulders more lavishly than Nvidia’s, with a resounding 79% buy rating from 34 analysts. Truist’s buoyant spirits shine through with a buy rating and a Street-high target of $600, raising the potential for a 42% profit for investors. Azure and Copilot stand as pillars of growth in Truist’s optimistic projections.
Microsoft’s proactive AI strides and robust legacy underpin why it’s Wall Street’s sweetheart. Fetching less than 36 times forward earnings, the stock wears a modest premium over the S&P 500’s multiples but remains a budget-friendly option compared to Nvidia, given its robust growth trajectory.
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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. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
