There is significant promise in artificial intelligence (AI). While some is undoubtedly hype, there are companies that will emerge dominant once the hype dies down. Two companies that look likely to remain on top once the excitement fades are Alphabet (GOOGL +4.82%) (GOOG +4.96%) and Amazon (AMZN +3.23%).
The two companies share a few common traits that position them as long-term winners. First, both have very strong core businesses that generate substantial operating cash flow, which allows them to spend big. Second, both have custom chip businesses that give them a cost advantage. And third, both companies have a history of evolving and innovating.
Let's dig deep into why these are two of the top AI stocks to buy today.
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Alphabet: The complete AI company
When it comes to AI, no company has a more complete AI stack than Alphabet. The company's edge starts with its chip business, as it developed its custom Tensor Processing Units (TPUs) more than a decade ago, giving it a big head start on the competition. During that time, the company has optimized its entire hardware and software ecosystem around its chips, and it is now on its eighth generation of TPUs.
With its latest generation of chips, Alphabet has introduced two versions. One iteration is all about power and training, while the other is packed with more memory for use with inference and agentic AI. This is a smart move and should continue to push the cost advantage the company has attained.
NASDAQ: GOOGL
Key Data Points
Meanwhile, Alphabet chips are so well regarded that it has begun to let its co-developer partner, Broadcom, sell them directly to a few select customers, both for use within its Google Cloud ecosystem and also for use outside its cloud-computing network. This adds another revenue driver for the company.
At the same time, by using its own chips to train and run inference for its leading Gemini model, Alphabet has a huge cost advantage over competitors. In addition, the company can monetize AI more effectively in the consumer space than start-ups, as it can embed Gemini into its other established products, including Google Search, and leverage its powerful, far-reaching global ad network.
Google remains the gateway to the internet through Alphabet's ownership of Chrome and Android, and through its search revenue-sharing deal with Apple.
With all its advantages, Alphabet will still be a winner even after all the AI hype fades.
Amazon: An AI and robotics leader
Another company positioned to be a long-term AI winner is Amazon. Like Alphabet, Amazon has a large, flourishing in-house chip business. The company recently revealed that this is a $20 billion run rate business, or around $50 billion including internal use. While internal use doesn't show up in revenue, Amazon said its chips are saving it a lot of money on reduced capital expenditures (capex) and inference costs.
NASDAQ: AMZN
Key Data Points
While Amazon's AI accelerators are not quite as highly regarded as Alphabet's chips, Amazon has formed two powerful partnerships with Anthropic and OpenAI. At the end of last year, it opened up a new data center dedicated solely to Anthropic, built using its Trainium chips, while it has $138 billion in AWS commitments from OpenAI. The company also has its own customer data center central processing unit (CPU), Graviton, which positions it well for agentic AI, where it is working in partnership with OpenAI.
In addition to its strong cloud computing and chip businesses, Amazon is, of course, the leader in e-commerce. Within this business, it is also the world's largest developer and manufacturer of robots. Today, it is using AI and robots to drive efficiency and operating leverage in its e-commerce business, leading to strong profitability growth.
As the market share leader in both cloud computing and e-commerce and a company that continues to invest and innovate, this is a stock to own for the long haul.
