Prediction: This will be Wall Street’s first $5 trillion stock

There are six publicly traded companies with trillion-dollar valuations. With a market capitalization of around $1.9 trillion Amazon (AMZN 0.08%) is the fifth most valuable company in the world, behind its competitors Apple, Microsoft, NvidiaAnd alphabet.

Currently, Apple, Microsoft and Nvidia are at the top with a market capitalization of over $3 trillion each. However, I think Amazon has the best chance of becoming Wall Street’s first $5 trillion stock.

Below, I’ll explain how artificial intelligence (AI) represents a lucrative growth opportunity for all major tech companies and why I think Amazon will emerge as the king of the tech industry in the long run.

Amazon’s next big catalyst

In recent years, investors have been bombarded with mostly vague information about AI and how large companies plan to integrate the technology into their businesses.

Promises of increased workplace productivity or improved data analytics don’t mean much unless you can prove that these technology upgrades are worth the money. The most obvious way to achieve this is through numbers.

Since the AI ​​revolution began, Amazon has invested billions of dollars in new products and services. Specifically, the company invested $4 billion in one of OpenAI’s competitors, Anthropic. In addition, the company has invested billions of dollars in investments (capex) in the data center infrastructure.

Let’s take a look at how these investments are paying off and what it could mean for Amazon’s future.

AMZN capital expenditure data (quarterly) from YCharts

Revenue growth is great, but rising profits are even better

Despite the exciting prospects for AI, Amazon faces other financial challenges. Macroeconomic forces, including stubborn inflation and rising interest rates, have slowed Amazon’s growth in core segments such as e-commerce and subscription services in recent years. Fortunately, changes in monetary policy, such as Other benefits, such as lower interest rates, will help spur renewed growth in these business segments.

In my opinion, investors are completely overlooking Amazon in the cloud computing segment – Amazon Web Services (AWS). As the company built a relationship with Anthropic, revenue increased And AWS’s profits have accelerated significantly.

This is important because the majority of Amazon’s operating revenue comes from AWS. As the overall profile around AWS improves, Amazon’s entire business improves as well.

To put this in perspective, Amazon’s trailing 12-month free cash flow increased 572% year over year to $53 billion as of June 30. At the end of the second quarter, Amazon had $89 billion in cash and marketable securities on its balance sheet.

Why I think Amazon could be the long-term winner

It’s obvious that Amazon is performing well, but why do I believe its growth prospects are far more robust than its competitors?

Currently, Nvidia is the leader in graphics processing unit (GPU) and data centers. However, competition is increasing AMD, Inteland many of Nvidia’s own customers make me wonder how much more fuel Nvidia’s rocket really has.

Apple is perhaps the biggest enigma in the AI ​​landscape among major tech companies. The company has been slow to move into the AI ​​space, and it’s too early to tell whether its strategy around Apple Intelligence (the marketing name for Apple’s AI tools) will pay off.

Like Nvidia, Microsoft has been hailed as an early winner in adopting AI. This is largely thanks to the company’s billion-dollar investment in OpenAI – the developer of ChatGPT – and the rapid integration of AI into the Windows operating system. While I think Microsoft will continue to grow at an impressive rate, its valuation has arguably already priced in a lot of upside potential – especially considering that Microsoft competes with Amazon and Alphabet in the cloud computing world.

And while Alphabet has built an incredible presence in the internet space thanks to its Google and YouTube platforms, increasing advertising competition has taken a toll on Alphabet’s main source of revenue. While Metaplatforms and TikTok are obvious threats, I think Amazon’s advertising business is hugely reduced and could further hinder Alphabet’s growth.

Given the above explanations, I think each of Amazon’s major cohorts could face a significant growth slowdown in the coming years. Alternatively, Amazon’s diverse ecosystem of e-commerce, subscriptions, grocery delivery, streaming, cloud computing, and more offers a level of immunity from competition that’s hard to beat.

I think Amazon’s sales and profits will continue to grow for years to come. As profitability and profits increase, I think Wall Street will eventually start valuing Amazon relative to its competitors.

For these reasons, I expect the company’s valuation metrics to rise dramatically – leading to rising stock prices and ultimately a market capitalization that far exceeds that of other large technology companies.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, 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. Adam Spatacco has positions at Alphabet, Amazon, Apple, Meta Platforms, Microsoft and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft and Nvidia. The Motley Fool recommends Intel and recommends the following options: long $395 January 2026 calls on Microsoft, short $405 January 2026 calls on Microsoft, and short $24 November 2024 calls on Intel. The Motley Fool has a disclosure policy.