Wall Street Favors Amazon as Top AI Stock in S&P 500, Outpacing Nvidia and Microsoft

The Best Artificial Intelligence (AI) Stock in the S&P 500 to Buy Now, According to Wall Street (Hint: Not Nvidia)

Amazon has a higher net percentage of buy ratings than any other stock in the S&P 500. Among Wall Street analysts that follow Amazon (AMZN 2.50%), 95% currently rate the stock a buy, and the remaining 5% rate the stock a hold. Not a single analyst recommends selling Amazon stock at the present time, according to FactSet Research. Microsoft is the only other company in the S&P 500 (^GSPC 0.90%) with the same percentage of buy ratings, but 2% of analysts recommend selling the stock, which lowers its net score by two points. Nvidia is also near the top, with 94% of analysts rating the stock a buy and the remaining 6% rating the stock a hold. In short, while Microsoft and Nvidia are close contenders, Amazon is the best artificial intelligence (AI) stock in the S&P 500 to buy now, if "best" is defined as the stock with the highest net percentage of buy ratings. Here's what investors should know. Amazon is putting AI to work across its three business segments Amazon has a strong competitive position in three big markets: e-commerce, digital advertising, and cloud computing. And the company is using artificial intelligence (AI) to boost revenue and improve efficiency across all three business segments. Amazon runs the largest e-commerce marketplace in North America and Western Europe in terms of sales, and Morgan Stanley analysts expect it to be the largest in the world by 2028. Faster delivery times should contribute to market share gains, while the broader shift toward online shopping should afford the company more pricing power over time, according to analysts. One corollary of its dominance in retail is a highly engaged consumer base and rich data. That combination has helped Amazon become the largest retail advertiser and the third-largest adtech company in the world. Its market share is expected to reach 9.4% in 2025, up almost two points from 2023, according to eMarketer. Finally, Amazon Web Services (AWS) is the largest public cloud, as measured by its market share of 40%. In that context, AWS is uniquely positioned to benefit as demand for AI infrastructure and platform services spurs greater cloud spending. AWS has leaned into the opportunity by designing custom chips for AI training and inference, and introducing a generative AI development platform called Bedrock. Amazon is also monetizing AI in more subtle ways. For instance, shoppers spend $443,000 per minute on the marketplace. Transactions generate data that not only informs the machine learning models that power its adtech software, but also its generative AI shopping assistant Rufus. Beyond that, Morgan Stanley says AI-driven supply chain optimization could boost its operating margin by 4 percentage points. Amazon looked strong in the second quarter Amazon reported solid financial results in the second quarter. Revenue increased 10% to $148 billion on strong momentum in advertising and cloud computing, and generally accepted accounting principles (GAAP) net income soared 94% to $1.26 per diluted share. But Amazon missed revenue estimates and management gave conservative guidance, so the stock fell about 10% following the report. On the bright side, CFO Brian Olsavsky told analysts Amazon achieved its fastest delivery speeds for Prime members this year, which has strengthened its position in everyday essentials. In turn, Prime members are shopping more frequently and spending more money, meaning Amazon is further entrenching itself as an e-commerce leader. Additionally, CEO Andy Jassy said, "Our AI business continues to grow dramatically with a multibillion-dollar revenue run rate despite it being such early days." He also told analysts Bedrock has the largest selection of models and the best generative AI capabilities in areas like model evaluation, information retrieval, and AI agent development. Amazon's share price is fair, but it's not the only AI stock worth buying Amazon stock has mostly recovered from its post-earnings dip, but shares still trade at an attractive price in context. Wall Street expects Amazon's earning to grow at 22% annually over the next three years. That makes the current valuation of 43.5 times earnings look reasonable. Investors should feel confident in buying a small position in this AI stock today. As a caveat, while Wall Street analysts are exceedingly bullish on Amazon -- more so than any other stock in the S&P 500, based on the net percentage of buy ratings -- the most prudent way to benefit from AI is to build a basket of quality stocks. Amazon is just one component of that basket. Investors should never limit themselves to a single AI stock.

2 Artificial Intelligence Stocks You Can Buy and Hold for the Next Decade | The Motley Fool

Wall Street analysts expect these industry leaders to grow their earnings at double-digit percentage annual rates over the long term. You don't have to take high risks to profit from the $184 billion artificial intelligence (AI) market. AI is bringing massive improvements to business productivity and more personalized services for consumers. Leading tech companies that you already know are among the ones that are best capitalizing on these trends. Here are two such stocks to buy today. Amazon (AMZN 2.50%) stock has more than doubled over the last five years and is currently up about 23% year to date in 2024. And the e-commerce leader still offers excellent return prospects over the next decade, particularly given its investments in AI. Most consumers will know Amazon first as a retail operation, but it's also the No. 1 enterprise cloud service provider, where Amazon Web Services (AWS) today controls more than 30% of a $297 billion market, according to Synergy Research. Revenue from AWS is accelerating -- it rose 19% year-over-year in Q2 -- as more enterprises are using AI services. For example, Ferrari is using generative AI from AWS to help design cars faster and deliver personalized experiences to customers. Many other leading companies have chosen AWS for AI, especially to take advantage of Amazon Bedrock, which helps them build custom AI applications. Amazon has been using AI in its e-commerce business for years to deliver personalized recommendations to customers based on their interests. It's also using AI to drive content recommendations to viewers of Amazon Prime Video. However, Amazon is still in the early stages of implementing generative AI in the shopping experience. It recently launched Rufus, a conversational shopping assistant that can answer questions about products. Over the long term, it has the potential to significantly reduce shopping time and convert more sales. Considering the attractive growth opportunities ahead for the tech titan, analysts expect Amazon's earnings to grow at a 22% annualized rate over the next several years. Assuming the stock is still trading at the same price-to-earnings multiple a decade from now, that would be enough growth for the stock to reach $1,350 by 2034. At a minimum, Amazon investors should expect the stock to outpace the average return of the stock market indexes. Alphabet (GOOG 0.81%) (GOOGL 0.72%) is one of the most AI-focused companies in the world. It drives everything that is important to the company's growth, including its digital advertising business, search, content recommendations on YouTube, and Google Cloud. Its shares have nearly tripled over the last five years and are up about 17% so far this year. Alphabet has been heavily investing in AI since 2015, when it launched TensorFlow, an open-source machine learning system that made AI research more accessible for other organizations. But the company made a big splash with the launch of Gemini in December. More than 1.5 million developers are using Gemini, making it one of the most widely used AI models, and it's also powering Google's products. Advertising generates about half of Alphabet's total revenue, and one of the biggest opportunities the company has with AI is to use the technology to drive more ad sales. Google is already seeing positive results from its rollout of its AI Overviews, a new feature that helps people get information about complex topics and is driving higher search frequency. Alphabet is also seeing growing demand for AI services in Google Cloud, where Gemini is helping developers build applications faster. Google Cloud offers a large selection of open-source and third-party AI models. Growing demand is boosting Google Cloud's profitability -- the segment's operating profit improved from $395 million in Q2 2023 to more than $1.1 billion in Q2 2024. Alphabet stock offers great value to investors right now. The shares are trading 15% off their recent high after the company in early August lost an antitrust case over anticompetitive behavior in the search market. It's uncertain what the consequences of litigation will be, but analysts still expect the company to grow its earnings at an annualized rate of 16% over the next several years. Assuming the stock keeps trading at the same price-to-earnings ratio it is now, with growth at that rate, shareholders could potentially double their investments by 2030.