Amazon’s AI Awakening: Can It Join Nvidia in the $4 Trillion Club?
Amazon (NASDAQ: AMZN), currently boasting a market capitalization of $2.3 trillion, has seen its share price climb 44% over the past five years. However, this growth lags behind the S&P 500’s roughly 80% increase, making it one of only two “Magnificent Seven” companies to underperform the benchmark index during that period. Microsoft is the other.
The Magnificent Seven: A Tale of Two Trajectories
While Nvidia has experienced a staggering 1,330% surge in stock value, fueled by its dominance in AI-driven graphics processing units (GPUs), Amazon’s gains have been comparatively modest. This disparity highlights the market’s current prioritization of companies directly benefiting from the AI boom.
Image source: Getty Images.
Why Amazon’s Underperformance?
Amazon’s revenue reached $716.9 billion in 2025, surpassing Walmart as the world’s largest company by revenue. Despite generating better profit margins than Walmart, its net income relative to revenue is lower than most other companies within the Magnificent Seven. What we have is largely due to the cost-intensive nature of its e-commerce business.
Amazon Web Services (AWS), while accounting for only 18% of total revenue, contributed $45.6 billion of the company’s $80 billion in operating income. The cloud infrastructure segment is already experiencing growth driven by AI demand.
The Untapped Potential: AI and E-Commerce
The market may be undervaluing Amazon’s potential in e-commerce. Significant margin improvements in online retail operations, driven by AI and robotics, appear likely over the next five years. Amazon is currently investing heavily in the infrastructure needed to support these advancements.
As the world’s largest company by revenue, Amazon’s massive sales base provides a strong foundation for earnings growth. Even modest margin improvements in its e-commerce business could lead to a substantial re-rating of the stock, potentially pushing its market cap towards $4 trillion.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Microsoft, Nvidia, and Walmart. The Motley Fool has a disclosure policy.
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