Better Artificial Intelligence Stock: Alphabet vs. Amazon
Summarize this article with:
Both companies are spending heavily on AI this year.There are a lot of great artificial intelligence (AI) stocks. Despite a downturn in AI stocks in recent days, the build-out of AI clearly has a long runway that will benefit buy-and-hold investors. Two of the best and biggest hyperscalers right now are Alphabet (GOOG +3.66%) (GOOGL +3.95%) and Amazon (AMZN +2.59%). Both companies have vaunted cloud computing divisions that are rapidly growing as companies look to develop, train, and run AI programs in cloud environments. But which of these two massively successful companies is the better buy? Let's look at both and choose the winner. Image source: Getty Images. The case for Amazon: E-commerce and cloud services Amazon made its mark in e-commerce, going back to its days as an online bookseller. In 2000, the company opened Amazon Marketplace to allow third-party sellers to offer products on its e-commerce network -- a move that helped Amazon expand to become the leading e-commerce company in the U.S. Amazon's revenue in the fourth quarter was $213.4 billion, up 13.6% from a year ago. More than $177 billion of that was from the company's e-commerce division, with sales up 11.8% from last year. But that pales in comparison to Amazon Web Services (AWS), which saw revenue jump 23.6% to $35.5 billion. More importantly, AWS is a much more profitable segment, generating income of $12.4 billion versus operating income of $11.6 billion for the much larger e-commerce division. ExpandNASDAQ: AMZNAmazonToday's Change(2.59%) $5.30Current Price$210.16Key Data PointsMarket Cap$2.2TDay's Range$203.77 - $211.1652wk Range$161.38 - $258.60Volume3.9MAvg Vol47MGross Margin50.29% AWS is by far the most interesting part of Amazon's business today, with new deals with OpenAI, Visa, Lyft, United Airlines, CrowdStrike, Salesforce, and more. That's why Amazon is planning to spend $200 billion on AI infrastructure this year -- a spending plan that is making some investors nervous, but should pay off in the long run. Alphabet: Internet dominance coupled with cloud services Alphabet has a lot of similarities to Amazon. While Amazon got its start in retail, Alphabet's roots go back to its famous Google search engine and Chrome browser. Both products are best-in-class and dominate their markets, giving Alphabet unquestioned superiority in generating revenue from internet advertising. And both companies have critically important cloud computing services. AWS is the leader of the pack with a 29% global market share, but Google Cloud has grown to third place, with 13% of the market. ExpandNASDAQ: GOOGLAlphabetToday's Change(3.95%) $11.96Current Price$314.81Key Data PointsMarket Cap$3.7TDay's Range$303.90 - $316.5252wk Range$140.53 - $349.00Volume2.2MAvg Vol37MGross Margin59.68%Dividend Yield0.27% But here's where the companies differ. While Amazon's legacy e-commerce division has relatively low profit margins, Alphabet is figuratively printing money with its web advertising businesses. In the fourth quarter, Alphabet reported $113.8 billion in revenue, with $95.8 billion from advertising on Google Search, YouTube, and the Google Network, as well as from subscriptions. Alphabet reported a hefty profit of $40.1 billion from all that work -- by far exceeding the profit margin from Amazon's retail business. Then add Google Cloud to the mix. Google Cloud generated $17.6 billion in revenue in the fourth quarter, up 47% from a year ago. And its $5.3 billion in operating income means that Google Cloud's profit margin is a healthy 30%. Alphabet is the better stock Alphabet is planning to spend heavily on AI infrastructure this year as well, projecting to spend up to $185 billion. Alphabet's massive advantage in internet advertising means that even with that spending, it will still be free-cash-flow-positive, while Amazon projects to have negative $17 billion in FCF this year, according to Morgan Stanley. Both companies are investing for the future, and I believe in their long-term growth stories. But Alphabet is a better business overall, which is why I give Alphabet stock the advantage here.Read NextFeb 20, 2026 •By Eric TrieStock Market Today, Feb. 20: Alphabet Jumps as Gemini Rollout Bolsters $185B AI BuildoutFeb 20, 2026 •By Anders BylundPrediction: 2 Stocks That Should Be Worth More Than Nvidia 10 Years From NowFeb 20, 2026 •By Sean WilliamsBillionaire Stanley Druckenmiller Dumped 4 of the Hottest AI Stocks and Nearly Quadrupled His Fund's Stake in Another Trillion-Dollar CompanyFeb 19, 2026 •By Johnny RiceHere's the Quantum Computing Stock Wall Street Loves the Most (Hint: It's Not IonQ or Rigetti)Feb 18, 2026 •By Daniel SparksAmazon vs. Alphabet: Which Is the Better AI Stock to Buy Now?Feb 18, 2026 •By Keithen DruryHere's Why Amazon, Alphabet, and Microsoft's AI Spending Is a Genius MoveAbout the AuthorPatrick Sanders is a contributing Motley Fool stock market analyst covering stocks and ETFs in the consumer, financial, and technology sectors. Before joining The Motley Fool, he was an assistant managing editor at U.S. News & World Report and a news editor for The Associated Press. He holds a bachelor’s degree in journalism from Marshall University.TMFPatrickStocks MentionedAlphabetNASDAQ: GOOGL$314.81 (+3.95%) $+11.96AmazonNASDAQ: AMZN$210.16 (+2.59%) $+5.30AlphabetNASDAQ: GOOG$314.67 (+3.66%) $+11.11*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.