Key Points
Alphabet plans to spend $85 billion this year to meet growing demand for cloud and other services.
Amazon’s artificial intelligence (AI) investments are driving profitable growth across the business.
Tech giants continue to announce more capital investment in artificial intelligence (AI) technology. Demand remains strong from large enterprises looking to gain better insights from their data using AI-powered services in the cloud.
Two companies that are benefiting from these trends are Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL) and Amazon(NASDAQ: AMZN). These companies are in a strong competitive position to bring AI innovation to consumers and enterprises, and better yet, their stocks are reasonably valued relative to their earnings potential.
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1. Alphabet
Shares of Alphabet have surged in 2025 as investors begin to recognize Google as an AI juggernaut. Google’s Gemini AI model powers intelligent features across all the company’s services, including Search, Google Cloud, and other apps. With 2 billion people using services like Google Search and Gmail every day, that makes Google one of the top consumer brands profiting from AI.
Google Search is having a strong year, all thanks to AI. Search revenue grew 12% year over year in Q2. New features like AI Overviews and AI Mode are driving more search frequency and new use cases for Search that is fueling more advertising revenue.
On the enterprise side, Google Cloud is seeing tremendous demand for AI services. Businesses are migrating their data to leading cloud platforms to access AI-powered analytics and application-building tools. This drove an impressive 32% year-over-year increase in cloud revenue last quarter, while the segment’s operating profit more than doubled.
AI is also bringing internal improvements to Google’s operations, such as automating more than 30% of its code. This frees up time for Google’s engineers to work on new ideas that can speed up its product development. This has the potential to accelerate its growth over the next decade, which isn’t reflected in the stock’s valuation.
Management plans to spend $85 billion in capital expenditures in 2025, up from the previous estimate of $75 billion. This is to meet the growing demand for cloud and other services, signaling that Google’s future growth is undervalued.
Even after the recent climb, the stock still trades at a forward price-to-earnings (P/E) multiple of 23 based on 2026 estimates. This is attractive for an AI-first company that should deliver double-digit annualized earnings growth over the long term.
2. Amazon
Amazon is another tech juggernaut that would make a solid addition to any investor’s portfolio right now. Its financial results have been solid this year, with improving sales and profitability in its largest business, e-commerce. But Amazon is also the leading cloud services provider, which is raking in billions in annualized revenue for enterprise AI services.
Amazon Web Services (AWS) generates $116 billion in annualized revenue. This represents 18% of the company’s total revenue, but produces most of the company’s profit. While AWS is facing greater competitive pressure from Microsoft Azure and Google Cloud, it continues to sign major deals with global brands. Last quarter, AWS signed new agreements with PepsiCo, Peloton, and Warner Bros. Discovery, among others.
Demand for AI is so great it is stretching AWS’ computing capacity. Specifically, generative AI solutions are experiencing triple-digit year-over-year growth. This means as Amazon invests in bringing more compute capacity online, AWS revenue could accelerate in 2026.
AI is also benefiting Amazon’s e-commerce operations through more intelligent delivery routing, inventory placement, and faster order processing, with more than 1 million robots at its warehouses. This shows a valuable synergy taking shape where AI improves the efficiency of the e-commerce business, while higher revenues from e-commerce help fund more investment in research and development for AI innovation in cloud services.
In many ways, Amazon has become an AI-first business, making it a solid choice for investors looking for a relatively safe business to invest in AI for the long haul.
The stock is trading at a forward P/E of 30 times, using next year’s earnings estimate. This is reasonable for a business that just posted a year-over-year earnings increase of 33%, partly driven by AI-driven cost efficiencies in e-commerce. Analysts expect the company to deliver 17% annualized earnings growth, which could double the stock by 2030.
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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, Peloton Interactive, and Warner Bros. Discovery. 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.