Alphabet and Amazon: Prime AI Stocks for 2025-26

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  Published in Stocks and Investing on Friday, December 12th 2025 at 11:01 GMT by MarketWatch
      Locale: UNITED STATES

Why Alphabet and Amazon Could Be Two of the Best AI Stocks Next Year

The surge of generative AI—from OpenAI’s GPT‑4 to Google’s Gemini—has turned the tech sector into a high‑stakes battlefield. MarketWatch’s article “Why Alphabet and Amazon could be two of the best AI stocks next year” argues that, among the many contenders, Google’s parent Alphabet and Amazon’s retail‑plus‑cloud behemoth stand out as the most compelling bets for 2025‑2026. Below is a concise synthesis of the piece, which pulls together data, strategic insights, and industry context from the original piece and the hyperlinks it cites.

1. AI is Becoming a Core Business Driver, Not a Niche Feature

The article begins by noting that AI has moved from a “nice‑to‑have” add‑on to an essential part of the business models for both Alphabet and Amazon. It cites several sources:

• Google Cloud’s Vertex AI – a platform that lets enterprises build and deploy AI models without deep ML expertise. The article links to Google’s own blog post outlining the launch of Vertex AI “in partnership with leading data scientists and industry partners.”
• Amazon Bedrock – Amazon’s managed service that gives developers instant access to foundation models from Anthropic, Stability AI, and other vendors. The article links to Amazon’s Bedrock documentation, which highlights the ease of integrating generative AI into applications.

By embedding AI across advertising, search, e‑commerce, and enterprise services, both companies are positioning themselves as “AI super‑platforms” that can scale quickly and capture new revenue streams.

2. Alphabet’s Multi‑Front AI Ecosystem

Alphabet is presented as a “one‑stop AI shop,” with several interlocking components:

The article notes that Alphabet’s R&D spend—over $28 billion in 2023—has increasingly channeled into AI, especially after DeepMind’s acquisition of Anthropic’s patents. Analysts quoted in the piece (e.g., Morgan Stanley’s AI‑specialist Daniel Choi) argue that Alphabet’s “deep moat” in data, computing infrastructure, and integrated product ecosystem means it can monetize AI faster than any competitor.

3. Amazon’s Two‑Tier AI Advantage

Amazon’s AI strategy is framed in two parts:

1. AWS AI Services – Bedrock, Comprehend, SageMaker, and the upcoming AWS Bedrock‑based chatbot. These services allow developers to deploy foundation models at scale, with Amazon’s massive cloud infrastructure giving a competitive edge in latency and cost.
2. Retail & Logistics AI – Amazon’s recommendation engine, dynamic pricing, warehouse robotics, and delivery‑route optimization already generate billions of dollars in incremental profit. The article cites Amazon’s 2023 10‑K, where it lists “AI‑driven services” as a new line item within “Fulfillment by Amazon” (FBA) and “Prime Video” cost centers.

The synergy between cloud and retail positions Amazon to capture both B2B and B2C AI demand, a combination that few competitors can match.

4. Financial Projections and Valuation Upside

The article delves into the numbers. Rough estimates from analyst research (Bloomberg, Goldman Sachs, and RBC) suggest:

• Alphabet – AI could lift operating margins from 25% to 28% over the next two years, translating into ~$15 billion additional EBITDA by 2026.
• Amazon – AI‑driven services could boost AWS revenue from $75 billion (2023) to $90 billion by 2026, while retail AI improves gross margin by 1.5 percentage points, adding ~$10 billion to operating profit.

With price‑to‑earnings ratios in the 30‑35x range for both companies, the article argues that a modest 5–10% share of the AI market growth could justify a 20–30% upside in their share prices.

5. Competitive Landscape and Risks

The piece acknowledges that Alphabet and Amazon are not alone. It references other “AI‑heavy” names:

• Microsoft – With Azure OpenAI and Copilot integration, Microsoft is a close competitor in the cloud‑AI space.
• NVIDIA – Dominates AI chip sales, but its revenue model is more “hardware‑centric.”
• Salesforce – Its Einstein AI is niche compared to Google Cloud’s Vertex AI.

However, the article stresses that Amazon’s and Alphabet’s combination of scale, data, and diversified revenue streams gives them a structural advantage. It also cautions about regulatory scrutiny: the U.S. Federal Trade Commission’s focus on “AI anti‑trust” issues could pose challenges for both companies.

6. Bottom Line: A Strong Case for Alphabet and Amazon

The article concludes that, while the AI boom is a “win‑win” for the entire tech sector, Alphabet and Amazon represent the most defensible bets for investors looking to capture the next wave of AI‑driven growth. Their integrated ecosystems, proven track records in scaling AI services, and sizable revenue bases create a compelling investment thesis.

TL;DR: Alphabet’s deep‑learning research, Vertex AI, and consumer products; coupled with Amazon’s Bedrock, AWS, and retail AI, create multi‑layered, high‑margin AI platforms. Analysts predict significant margin expansion and revenue growth, making both stocks prime targets for investors eyeing the next AI surge.