AI (artificial intelligence) has become the most important growth theme in tech. But it has also created a problem for investors: many of the pure-play AI names are either unprofitable, hard to value, dependent on one product or platform, have just a few big customers representing the bulk of their revenue, or have seen their stocks soar to the point that their shares are grossly overvalued.
With this said, I'd argue that some of the most compelling AI stories are hiding in plain sight. The best way to think about AI, in many cases, is not as a stand-alone product, but as a new layer of capability that gets embedded into existing tools people already use every day. And that brings investors to two giants: Amazon (AMZN 0.02%) and Microsoft (MSFT 0.15%). Both are building the infrastructure that powers AI, and both are distributing AI tools through platforms customers already depend on.
Here's a closer look at why I think both Amazon and Microsoft make for great AI growth stocks to buy and hold for the long haul.
Image source: Getty Images.
Amazon
When most people think of Amazon, they think of online shopping. But the company's biggest AI opportunity sits inside Amazon Web Services, or AWS -- Amazon's cloud computing business. Even more, this business is actually already Amazon's biggest profit contributor, adding more to its bottom line than its e-commerce business.
Amazon's total third-quarter sales rose 13% year over year to $180.2 billion. But AWS sales, specifically, increased 20.2% to $33.0 billion -- an acceleration from 17.5% growth in Q2. AWS also remained the company's primary profit engine, with segment operating income of $11.4 billion, representing 66% of Amazon's total operating income.
NASDAQ: AMZN
Key Data Points
Importantly, management framed AI as a companywide lever, not just something helping its AWS business.
"We continue to see strong momentum and growth across Amazon as AI drives meaningful improvements in every corner of our business," CEO Andy Jassy said in the earnings release.
This positive impact AI is having across its business helps explain why the company is investing so heavily to support further expansion in compute power. Over the last 12 months, operating cash flow rose 16% to $130.7 billion, but free cash flow fell to $14.8 billion from $47.7 billion a year earlier. The decline was primarily driven by a $50.9 billion year-over-year increase in capital expenditures -- largely due to investments in data centers and related infrastructure.
Microsoft
Microsoft's AI advantage is similarly based in the cloud. The company's equivalent of AWS is Azure. And, like Amazon, Microsoft is deploying AI features across its existing products, like Office and Teams.
But Microsoft is seeing even faster growth. Revenue in its most recent quarter (the first quarter of fiscal 2026) rose 18% year over year to $77.7 billion. And operating income increased 24% to $38.0 billion.
But what's particularly impressive about Microsoft's business is the momentum it is seeing in the cloud. Its "Azure and other cloud services" revenue increased 40% year over year in fiscal Q1 -- up from 39% growth in the fourth quarter of fiscal 2025.
Like Amazon, the company is spending heavily to support the accelerating demand for AI computing. Capital expenditures in fiscal Q1 were $34.9 billion, "driven by growing demand for our cloud and AI offerings," management said in the company's fiscal first-quarter earnings call. In addition, management said it expects its capital expenditures to increase sequentially and that the growth rate of its total capital expenditures for the full year of fiscal 2026 will be higher than in fiscal 2025.
This aggressive investment makes sense because the company's commercial remaining performance obligations (RPO) are soaring. Specifically, Microsoft's commercial RPOs rose 50% year over year to more than $400 billion.
NASDAQ: MSFT
Key Data Points
Why these two stocks?
Why these AI growth stocks? The bull case for both is simple. They are already large, profitable businesses. Now they have a new layer to their business, creating new opportunities and accelerating the already-strong core businesses they already own.
The main trade-off, of course, is that AI is expensive to build. And any significant spending comes with risks -- risks that the payoff may not be as good as expected.
Of course, buying into these well-rounded AI growth stories isn't cheap. Shares of Amazon and Microsoft trade at forward price-to-earnings ratios of 29 and 30, respectively. Additionally, investors should probably keep their positions in the stocks small, given their high valuations and the risk that their significant spending on AI may not pan out as well as expected. However, my guess is that both Amazon and Microsoft's significant spending on AI infrastructure will pay off lucratively, possibly even accelerating the companies' earnings growth -- and making an investment in the stocks rewarding over the long term.
