In 2023, Bank of America analyst Michael Hartnett coined the term "Magnificent Seven" to describe a group of powerhouse tech stocks, inspired by the classic 1960s Western film. These companies, among the market's most valuable, are leading the way in artificial intelligence (AI), cloud computing, online gaming, and advanced hardware and software.
Over the past five years, the Magnificent Seven have delivered mind-boggling returns, but 2025 has been more challenging. So far, only Meta Platforms has significantly outperformed the S&P 500 (SNPINDEX: ^GSPC) (up 2.4% year to date as of this writing), while others have flat-out struggled.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
AAPL data by YCharts
One standout performer this year is Amazon (NASDAQ: AMZN), a leader in e-commerce and cloud computing. With its stock outperforming the S&P 500 by a little over 2% year to date, Amazon is proving to be an unstoppable force as it deepens its push into AI.
Image source: Getty Images.
Let's explore why this AI pioneer scans as a top buy right now.
During Amazon's Feb. 6 earnings call, CEO Andrew Jassy outlined the company's comprehensive AI strategy, revealing approximately 1,000 different generative AI applications either already built or in development. Amazon's approach spans three critical technology layers, each showing significant progress.
Amazon develops proprietary AI chips at its foundation. The recently launched Trainium2 delivers 30% to 40% better price performance than current graphics processing unit (GPU) alternatives, according to the company. Building on this success, Amazon plans to release Trainium3 in late 2025 and has begun defining Trainium4. It is also partnering with chatbot pioneer Anthropic for frontier model development.
In the middle layer, Amazon Bedrock provides foundation models for building AI applications. In Q4 2024, the company introduced its Nova models inside the Bedrock platform, delivering comparable intelligence to leading models at a staggering 75% lower cost than its other offerings. This technological breakthrough has already attracted several major customers like Palantir Technologies, SAP, and Robinhood.
At the application level, Amazon's AI assistant, Q, demonstrates practical value for users. In early implementations, Q generated substantial savings, including $260 million and 4,500 developer years in Java migrations. The company is expanding Q's capabilities to help customers more efficiently migrate existing Windows servers, VMware systems, and mainframe computers to Amazon Web Services (AWS).
Amazon's 2024 Q4 earnings report demonstrated its massive investment capacity, with capital investments reaching $26.3 billion in the quarter. While this spending spans various business needs, the company has prioritized AI development as a key strategic focus. This aggressive investment strategy is already showing results, with AWS's AI-related revenue growing at a blistering pace and contributing to the division's $115 billion annualized revenue run rate.
While current growth faces hardware supply and power infrastructure constraints, Amazon expects these limitations to ease in the second half of 2025. As Jassy emphasized during the earnings call, "AI represents, for sure, the biggest opportunity since cloud and probably the biggest technology shift and opportunity in business since the internet."
Amazon stock trades at 35.4 times forward earnings, compared to 24.2 times for the benchmark S&P 500. This premium reflects the company's comprehensive AI strategy and proven execution across multiple layers of the tech value chain. The tech giant offers investors exposure to every critical layer of the AI stack, from custom chips to enterprise applications.
Moreover, Amazon's AI business is already generating a triple-digit annualized revenue growth rate. With supply constraints expected to ease in the second half of 2025, Amazon appears well-positioned for the next wave of AI growth.
For investors seeking AI exposure, Amazon offers proven capability and a substantial capital investment in the technology that should drive significant revenue growth for years to come.
Before you buy stock in Amazon, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $813,868!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
Learn more »
*Stock Advisor returns as of February 7, 2025
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Bank of America is an advertising partner of Motley Fool Money. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. George Budwell has positions in Apple, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Bank of America, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.