Better Artificial Intelligence (AI) Stock: Amazon vs. Alphabet
Keithen Drury, The Motley Fool
Thu, July 16, 2026 at 2:10 AM GMT+5:30
4 min read
- AMZN
+3.02% - GOOG
+3.60% - NVDA
+0.33%
Two of the big four artificial intelligence (AI) hyperscalers are Amazon (NASDAQ: AMZN) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). These two are major players, yet they are deploying different strategies in the AI race
Which one of these two is the better buy? Let’s take a look, as they appear to be two entirely different companies on the surface
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Cloud computing is a central focus for each
Amazon is still mostly known as an e-commerce business, but I think investors should view it differently. It operates the largest cloud computing service in the world, Amazon Web Services (AWS), and it’s a major part of the company. In fact, AWS generated 59% of Amazon’s operating profit in Q1, despite accounting for only 21% of sales. That’s because AWS’ margins are far higher than the margins of Amazon’s commerce segments. And with AWS growing at a 28% clip, the share of profits coming from it is likely to continue rising.
Alphabet is a large conglomerate, but the Google ecosystem still sits at the heart of the operation. The majority of its revenue comes from advertising, but it also has a cloud computing component
Google Cloud is smaller than AWS, with revenue coming in at $20 billion during Q1 (versus AWS’ $37.6 billion), but it’s growing at a blazing fast 63% rate. However, Google Cloud doesn’t give Alphabet quite the same profitability boost that AWS does for Amazon, as advertising is already a high-margin business. Still, it’s a growing contributor to Alphabet’s overall picture
Both companies are spending hundreds of billions of dollars a year on data center capital expenditures because they see a major opportunity in the cloud computing market, so they’re investing heavily to build out computing capacity to capture a piece of it. This is a smart strategy, although it may take a handful of years for them to see the payoffs from it. Still, I think investors should give them some leeway, as they understand what customers demand in computing re
One difference between AWS and Google Cloud is that AWS doesn’t have a native generative AI model, whereas Alphabet does. With Alphabet, users can deploy Google’s Gemini family of AI models. With Amazon, investors can use a variety of AI models. While other AI models can be deployed on Google Cloud, it seems like the logical choice to go with its native model if you’re using its ecosystem already. I don’t think this is a huge difference maker, but it is something investors should be aware of
