Artificial intelligence (AI) has become a major tailwind for technology businesses over the last couple of years. But just how big of a factor is the AI boom for the world's largest enterprises?
Consider semiconductor powerhouse Nvidia (NVDA 2.17%) as a prime example. Exactly two years ago, Nvidia's market capitalization was $700 billion. Today, it is worth north of $2.7 trillion -- trailing only Microsoft and Apple as the world's most valuable companies.
Over those same two years, e-commerce and cloud computing behemoth Amazon (AMZN 3.89%) added just shy of $1 trillion to its own market value. While Amazon trails Nvidia's valuation today, I think the company could be worth much more than the semiconductor giant by next decade.
Let's explore how Amazon's business is transforming thanks to the AI revolution. More importantly, I'll break down why I think the stock is a no-brainer buying opportunity right now for investors to buy and hold for the long term.
NASDAQ: AMZN
Key Data Points
How Amazon is jump-starting its business
Amazon reports its revenue across six major categories: online stores (e-commerce), physical stores, third-party seller services, advertising, subscriptions, and Amazon Web Services (AWS).
E-commerce, brick-and-mortar storefronts, and third-party seller services all touch the retail industry where Amazon has its roots. Over the years, the company did a good job of branching out beyond retail and getting involved in higher-margin opportunities through advertising, Prime subscriptions, and cloud computing (AWS).
While AI has the potential to disrupt all of Amazon's operational segments, AWS and retail are the two that have me most encouraged.
On the retail side, Amazon is investing heavily in AI robotics. Essentially, the company is outfitting its fulfillment centers with robotic processes that can bring a new level of automation and efficiency to packaging and shipping services. In turn, Amazon should be able to reduce labor costs in its warehouses over time, resulting in greater profitability for its core retail operation.
Over the last couple of years, AWS has been going through something of a renaissance thanks to its $8 billion investment into AI start-up Anthropic. Amazon first partnered with Anthropic in September 2023. At the end of 2023's third quarter, AWS was operating at a $92 billion annual revenue run rate and with an operating income margin of roughly 30%. As of the end of 2025's first quarter, AWS' revenue run rate is over $117 billion while its operating income margin is nearly 39%.
That combination of accelerating revenue and widening profit margins is lucrative. Amazon is also making some major moves to bolster the AWS platform -- notably through the development of custom chipsets and heavy investments in data center infrastructure.
Image Source: Getty Images.
Why Nvidia's business might start to slow down
Amazon is in the early phases of developing its own AI chips. Its "Magnificent Seven" cohorts Microsoft, Meta Platforms, and Alphabet are pursuing similar ambitions.
While I don't think this will be catastrophic for Nvidia, it likely won't help it in the long run. As it stands today, each of these megacap technology companies works closely with Nvidia. But as more high-end AI chip options enter the market, theoretically, these businesses won't need to rely on Nvidia as heavily.
Already, its chipmaking rival Advanced Micro Devices has already been able to win over the likes of Oracle, Meta, and Microsoft as major buyers of its own competing GPUs, so investors might want to prepare for less robust growth in Nvidia's sales and profits down the road.
Amazon stock is trading at a light valuation... and that could soon change
If the introduction of more chips that rival its GPUs ends up becoming a headwind for Nvidia, and if its revenue and profit gains become less inspiring for growth investors, then I think it's highly likely that the company's valuation multiples could compress. On the flip side, Amazon appears to be in the early stages of taking advantage of new opportunities for accelerated growth, particularly in AWS and its retail marketplaces.
Nevertheless, Amazon's valuation trends suggest that investors are not yet placing much of a premium at all on the company's efficiency improvements or their long-run potential. When you account for how much the company's operating profits have grown over the last several years relative to its market cap gains, Amazon looks dirt cheap.
If it keeps up its current trajectory, though, the company should be in a position to continue accelerating sales while minting billions in cash flow in the process. This has me optimistic that Amazon's valuation could begin to witness notable expansion over the next several years relative to peers such as Nvidia -- ultimately becoming a much larger company by 2030.
