All everyone wants to talk about is Nvidia. The computer chip company is now the largest stock in the world by market capitalization, quickly joining the $3 trillion club along with Apple, Microsoft, and Alphabet. Investors are betting with their wallets that the rising demand for artificial intelligence (AI) computing power will drive huge earnings growth for the likes of Nvidia.
They are forgetting one company that will be an underrated beneficiary of AI growth: Amazon (AMZN 2.46%). The company has a cloud and computer chip deal with start-up Anthropic, as well as numerous ways to benefit from AI in its media business.
At a market cap of $2.5 trillion today, I think it is an easy hurdle for Amazon to surpass a $3 trillion market cap by sometime in 2026, if not by the end of this year.
Here's why.
Image source: Getty Images.
AWS and Anthropic
Amazon Web Services (AWS) is the original cloud computing juggernaut. In the age of AI, the market is feeling like it is left behind. Alphabet has its own AI infrastructure to build with Google Cloud, while Microsoft won a huge partnership with OpenAI to drive growth for its cloud business. Now, even Oracle is winning contracts from OpenAI in a reported $300 billion deal.
While it would have been nice to see AWS win some of these deals, the division is much more focused on generating positive return on investment than other players, which is likely why Oracle won the recent deal from OpenAI.
Anthropic is AWS' bet as an AI partner, and it is currently flying under the radar. Anthropic is an AI software provider focused on the enterprise and coding markets. Its revenue is exploding higher, growing from annual recurring revenue (ARR) of $1 billion at the start of this year to $5 billion as of its latest update. AWS is Anthropic's key cloud partner, where it plans to spend billions of dollars to train and run its AI systems. The partnership is so deep that Anthropic is now working with Amazon to build custom computer chips to compete with Nvidia.
Revenue at AWS grew 17% year over year last quarter to an ARR topping $123 billion, although it is growing slower than competition like Google Cloud or Microsoft Azure. However, with Anthropic hitting a growth inflection, AWS' revenue should start to accelerate in the coming quarters. With fat operating margins of 37% over the last 12 months, AWS can be a strong contributor to Amazon's consolidated earnings growth through the next few years.
Bringing AI to e-commerce
Not only will AWS earnings benefit from AI, so too will Amazon's e-commerce and media business. Specifically, it will help with its fast-growing advertising segment. Advertising revenue is currently growing 22% year over year and likely has fantastic profit margins.
This week, Amazon released a new agentic AI tool for building advertisements. In the creative studio, even small businesses can now build robust advertisements that will go on the Amazon marketplace, Prime Video, and other Amazon partner platforms. This will greatly expand the addressable market for Amazon's advertising services. With so many small businesses around the world selling on the platform, Amazon is the perfect advertising platform that can connect sellers to willing buyers of its products.
NASDAQ: AMZN
Key Data Points
And this is just the tip of the iceberg. Amazon can deploy AI for robotics, delivery systems, and customer search to improve the value proposition and efficiency of its e-commerce ecosystem. Altogether, it should help retail expand its profitability, which still has a lot of room to grow with just 7.5% profit margins over the last 12 months.
AMZN EBIT (TTM) data by YCharts
Why Amazon will join the $3 trillion club
Amazon's market cap will surpass $3 trillion shortly because of the huge potential for earnings growth in the next few quarters. The company's EBIT -- earnings before interest income and taxes -- shot up to $77 billion in the last 12 months on margin expansion. As revenue growth at AWS accelerates and margins keep expanding in North American retail due to advertising, investors should see trailing-12-month EBIT cross $100 billion at some point in 2026.
For a high-quality business like Amazon, a multiple of 30 times its trailing EBIT is entirely reasonable. It actually trades at a higher multiple than that right now. Thirty times EBIT on $100 billion in earnings is a $3 trillion market cap. That is the math behind my Amazon prediction, and why I think it is now the best AI stock to add to your portfolio today.
