Is Microsoft, Amazon, or Alphabet the Best Stock in This $1.5 Trillion Industry?

Cloud computing is a massive industry, and it will only get bigger. Grand View Research pinpoints the total cloud computing market opportunity at $620 billion right now, but it's expected to grow to $1.5 trillion by 2030. With such a large opportunity available, plus massive growth, investors must have exposure to this industry.

The problem is that there are almost no pure plays in cloud computing. Instead, they're hidden within much larger companies. At the top of the list in cloud computing market share right now are Microsoft (MSFT -1.40%), Amazon (AMZN 0.26%), and Alphabet (GOOG -3.59%) (GOOGL -3.72%). Cloud computing is not any of these companies' largest components, but it is an important growth factor.

But which one of these is the best to own?

Each product is experiencing different growth levels

The three companies likely need no introduction, as they all rank among the five largest companies in the world. Of the three, Microsoft's Azure fits within its existing businesses, like its business productivity products, the best. Microsoft has also been trusted with business data for years, which increases client confidence.

Google parent Alphabet has its fingers in all tech areas, so cloud computing makes sense as another offering. Alphabet also has artificial intelligence (AI) aspirations, and cloud computing is an important part of that strategy.

Finally, Amazon Web Services (AWS) seems to be the odd one out, as Amazon is known as an e-commerce business. However, AWS was one of the first cloud computing products available and actually holds the largest market share, holding a 32% grasp on the industry as of the second quarter of 2023. Compared to Azure's 22% and Google Cloud's 11%, AWS is far and away the market leader.

But just because AWS is on top doesn't mean it's doing what it needs to do to stay there. Of the three, AWS grew the slowest in the third quarter.

Data sources: Amazon, Microsoft, and Alphabet. *Note: Microsoft doesn't break out its Azure revenue but did specify in Q4 FY 2023 that Azure now makes up at least 50% of its Intelligent Cloud division revenue.

Despite Microsoft Azure being larger than Google Cloud (and thus harder to grow faster), Azure surpassed Google Cloud's growth rate in the quarter. With Azure firing on all cylinders while AWS is struggling, it's starting to make up ground on the market leader.

But Amazon management believes AWS is poised to return to growth mode shortly. The growth slowdown was caused by customer optimization, which Amazon helped with. However, it's starting to see a greater volume of deals flowing through the pipeline, which will be a huge factor in 2024.

Google Cloud also experienced some customer optimization in Q3, which dragged on revenue slightly. But its top-tier AI tools available on its platform still make Google Cloud a top choice for many companies, which is why 60% of the top 1,000 largest global companies utilize Google Cloud.

While all three have different challenges and successes, which is the best buy right now?

All three have something different to offer investors

Unfortunately, there's no one-size-fits-all answer for which is the best stock. Because cloud computing is only a part of each company, you must analyze other segments to understand which stock will be best over the long term. Microsoft has the most momentum, and its customer relationships make it a top pick in this space.

Amazon is the largest by market share and will likely maintain that position for a long time. It's also a more balanced company with its e-commerce wing.

Alphabet is heavily advertising-dependent and is prone to drawdowns depending on economic sentiment. But, with more than half of generative AI start-ups utilizing Google Cloud, it could capture a large chunk of market share, depending on how big the AI revolution is.

I think the best approach is to purchase all three companies, as each has something different to offer. But, if you're going to corner me, it's hard to argue against Microsoft right now, thanks to its incredibly strong execution in its most recent quarter.