The "Magnificent Seven" stocks are no stranger to artificial intelligence (AI). These leaders in technology have been investing in the area to either improve their internal processes or to develop products. The "Magnificent Seven," a reference to the 1960 Western, led the Nasdaq and S&P 500's gains last year, and most continue to soar higher this year too -- thanks to their promising long-term outlooks.
But just one of these top stocks represents a once-in-a-generation AI buying opportunity right now. The company benefits from AI in two ways, by using AI itself and selling AI tools. This innovator is already generating revenue from its AI investments and aims to play a central role in the development of this red-hot technology. The company has a long track record of profitability, and considering all of its positive points, trades for a bargain price today -- offering investors a unique buying opportunity. Let's find out more.
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A leader in two high-growth areas
First, a quick look at the list of Magnificent Seven companies. They include Amazon (AMZN 0.58%), Apple, Alphabet, Microsoft, Meta Platforms, Nvidia, and Tesla, and each one offers interesting growth prospects. The once-in-a-generation buying opportunity, though, is Amazon, a leader in the two high-growth fields of e-commerce and cloud computing -- and a potential AI powerhouse.
Amazon already has started reaping the rewards of its early investments in AI, reporting a more than $100 billion annualized run rate for its cloud business, Amazon Web Services (AWS). AWS is focused on AI, offering a wide variety of products and services for every "layer" of AI needs.
For example, AWS offers a broad range of chips -- from Nvidia's to its own lower-priced chips for the cost-conscious customer -- for companies training large language models (LLMs). For customers who don't want to start from the ground up, Amazon offers a fully managed service that allows them to customize top LLMs for their own projects. Finally, Amazon also builds AI apps such as Amazon Q, a generative AI assistant for software developers.
And AWS is well positioned to attract AI business since it's the world's No. 1 cloud services provider -- so it already has a huge audience ready to learn about its latest products and services.
"We're optimistic that much of this world-changing AI will be built on top of AWS," chief executive officer Andy Jassy wrote in his recent shareholder letter.
The early days of a game-changing technology
And this brings me to the subject of the once-in-a-generation investment opportunity: investing in a key player in AI's early days. Amazon says that at least 85% of information technology spending right now is on-premises. As this shifts to the cloud, Amazon should benefit in a major way. On top of this, generative AI projects to be built directly on the cloud over the coming 20 years may add even more to growth, the company predicts.
It's important to remember Amazon also is benefiting from AI by applying these tools to its own business to lower costs and save time. For example, the company's robotics team is building AI models to perform a variety of tasks including handling workflow bottlenecks.
Today, Amazon shares trade for about 41x forward earnings estimates, down from about 55x late last year. At the same time, the company's recent earnings reports are reason to be optimistic about the future. In the most recent quarter, sales rose in the double digits, net income more than tripled, and AWS sales and operating income soared as customers' budgets improved and AI demand increased. Analysts' annual growth estimates for Amazon over the coming five years are positive too, topping 30%.
All of this makes Amazon a standout long-term buying opportunity right now -- and one you may come across only once in a generation.
