The "Magnificent Seven" refers to a group of seven American technology giants that are the dominant players in their markets. The term was coined by Bank of America analyst Michael Hartnett in 2023 because of their massive influence on the U.S. stock market and their ability to substantially outperform the overall market's gains.
It is worth noting that the Magnificent Seven companies account for just over a third of the S&P 500 index's combined market cap as of May 2025. That's nearly triple when compared to 2015 when these tech giants made up around 12% of the S&P 500 index. This clearly shows the stock market dominance of these seven companies, many of which are now capitalizing on the rapid proliferation of artificial intelligence (AI).
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Amazon (AMZN 1.35%), the world's fourth-largest company by market cap at this writing, belongs to this group. The e-commerce and cloud computing giant has delivered impressive returns of 145% since the beginning of 2023, outpacing the 55% jump clocked by the S&P 500 index during the same period. Importantly, Amazon has the potential to continue outperforming the broader market in the long run as well thanks to its focus on integrating AI tools and services into its businesses.
In fact, this tech giant could turn out to be one of the best Magnificent Seven stocks to buy right now to capitalize on the growth of AI. These two massive growth drivers show why that may be the case.
Amazon can win big from this humongous end market with AI's help
AI is going to impact multiple industries, and the good part is that Amazon is among the leaders in a couple of those multibillion-dollar markets. E-commerce, for instance, is Amazon's largest source of revenue. The company generated $94 billion in revenue in the first quarter from its online stores and third-party seller services, accounting for 60% of its top line.
There is a lot of opportunity for Amazon to tap in this space. That's because the size of the global e-commerce market is expected to grow at an annual rate of 19% through the end of the decade, generating annual revenue of a whopping $73.5 trillion. Amazon has been busy integrating AI-focused tools to ensure that it can corner a nice chunk of this phenomenal opportunity.
AI is being used in e-commerce to analyze customer behavior and predict buying patterns, provide product recommendations, and manage inventory by keeping an eye on demand-supply trends, among other things. Not surprisingly, the adoption of AI in the e-commerce market is expected to grow at an annual rate of 24% through 2033.
Amazon has been introducing solutions to ensure that it can help both buyers and sellers use AI to achieve their goals. For instance, the company's Project Amelia is a generative AI assistant that allows sellers to gain insights into their business with simple prompts. Moreover, sellers can use AI to create content such as images and videos to promote their businesses on Amazon's platform.
Similarly, customers can find relevant products on Amazon with the help of its recently introduced Interests feature. These initiatives can help boost Amazon's e-commerce revenue in the long run, but this isn't the only way the company is relying on AI to boost its business.
AI in the cloud is already giving the company a nice shot in the arm
Amazon's cloud computing segment, Amazon Web Services (AWS), is already outpacing the company's growth. Its cloud revenue was up 17% year over year in the first quarter, which was nearly double the increase in its overall revenue.
AWS delivered $29 billion in revenue for Amazon in Q1, which means that this business has attained an annual revenue run rate of more than $100 billion. Importantly, management believes that AWS could be much larger than the "multi $100 billion revenue run rate business" it predicted earlier, thanks to AI.
That's not surprising as the booming demand for cloud-based AI services could open up a potential revenue opportunity of nearly $650 billion for Amazon by 2030, according to Grand View Research. Amazon's customers can build and deploy AI applications in the cloud with the help of popular large language models powered by powerful graphics cards and its in-house custom processors that offer a better price-to-performance ratio.
What's worth noting is that Amazon's AI-focused cloud business has already attained a multibillion-dollar annual revenue run rate. Even better, this business has been clocking year-over-year growth in triple-digit percentages. Given that AWS is the leader in the global cloud infrastructure services market with a 30% share, it is in a terrific position to make the most of the huge AI-related opportunity present in this market.
As such, it won't be surprising to see AWS growth accelerating over the long run and complement the growth of its e-commerce business. Importantly, Amazon plans to raise its capex in 2025 to $100 billion, which would be a 20% increase over last year. The company is spending the majority of its capex to serve the growing demand for its cloud-based AI services by improving its technology infrastructure and developing custom AI chips so that it can give customers a more cost-effective option to build AI applications.
These steps by Amazon are expected to translate into stronger earnings growth for the company. Analysts are forecasting a 12% increase in its bottom line this year to $6.20 per share, but that's expected to be followed by stronger years in 2026 and 2027.
AMZN EPS Estimates for Next Fiscal Year data by YCharts
The massive end-market opportunities in the e-commerce and cloud computing markets could help Amazon deliver strong levels of earnings growth for a much longer period, which is why buying it right now while it is trading at an attractive 32 times forward earnings could turn out to be a smart move.
