The dawn of generative artificial intelligence (AI) has been something of a windfall for the Magnificent Seven stocks, as these tech titans were already well-versed in earlier forms of AI. The popular collective, made up of Meta Platforms, Apple, Amazon(NASDAQ: AMZN), Alphabet, Microsoft, Nvidia(NASDAQ: NVDA), and Tesla, ran circles around the broader market in recent years, becoming the toast of Wall Street in the process.
Nvidia has become the de facto poster child for AI thanks to its pioneering work in graphics processing units (GPUs), which provide the computational horsepower that underpins most AI models. The stock represents a significant portion of my personal portfolio, and I expect Nvidia to beat the market for the foreseeable future.
So, you might be surprised to learn that if I could buy just one Magnificent Seven stock to hold for the next 10 years, it wouldn’t be Nvidia. Here’s why.
Image source: Getty Images.
Now, before I reveal my pick for the next decade, it’s worth reviewing the case for Nvidia. And make no mistake — there’s a lot to like. After all, Nvidia is the undisputed leader in the data center GPU space, with a dominant 92% share of the market, according to IoT Analytics. Since most AI processing takes place in the data center, this is Nvidia’s race to lose. Furthermore, Nvidia’s annual release cadence for new AI-centric processors has put its rivals on notice that it has no plans to cede the top spot anytime soon.
That said, competition has begun to ramp up in recent months. Advanced Micro Devices recently inked a lucrative 6-gigawatt deal with OpenAI to use its Instinct MI450 series chips and rack-scale AI solutions. Broadcom, with its application-specific integrated circuits (ASICs), scored its own 10-gigawatt deal with OpenAI.
To be clear, Nvidia kicked off the proceedings with a 10-gigawatt deal and an investment of up to $100 billion in the ChatGPT creator. However, these recent developments show that even the biggest names in AI are reluctant to put all their eggs in one basket, leaving an opening for the competition.
Don’t get me wrong. Nvidia became the industry leader fair and square, and I expect it to retain the crown for years to come. But a lot can happen in 10 years. And given Nvidia’s stock price increase of 1,150% since early 2023, it’s unlikely it will be able to duplicate that performance in the years to come.
If we’ve learned anything since the dawn of AI, it’s that the technology has the potential to ramp up efficiency and generate productivity increases unlike anything that’s been seen before. Of all the Magnificent Seven companies, one is uniquely positioned to reap the benefits of AI across its vast business empire: Amazon.
The digital retailer has long employed advanced algorithms to maintain sufficient inventory at its warehouses and distribution centers, and determine the most cost-effective delivery routes. It even uses AI-powered robots to stock shelves and prep merchandise for shipping. Generative AI takes that to the next level.
Amazon’s fast-growing digital advertising business is another beneficiary of the company’s AI acumen. By infusing its adtech with AI, Amazon can better match ads with its target market.
Last but not least is Amazon Web Services (AWS), the company’s cloud infrastructure business. The company continues to lead the industry it pioneered and has reignited its growth by serving up generative AI systems and tools to its cloud customers, which act as a captive audience for its offerings.
Don’t take my word for it. In the second quarter, Amazon’s overall sales increased 13% year over year to $167 billion, while its earnings per share (EPS) of $1.68 jumped 33%. But even that doesn’t tell the whole story. AWS grew nearly 18% year over year to $31 billion, and advertising revenue jumped 23% to nearly $16 billion.
This summer, CEO Andy Jassy provided an update, saying that Amazon had more than “1,000 generative AI services and applications in progress or built,” which are a “small fraction of what we will ultimately build.” Jassy believes AI agents are the next frontier, with new agents being put to work “across all our business units.”
Despite all that opportunity, Amazon stock is selling for just 33 times trailing-12-month earnings, less than half the stock’s three-year average and only a slight premium to a multiple of 31 for the S&P 500.
It’s hardly a fair comparison, as Amazon stock has returned 656% over the past decade compared to just 231% for the S&P 500 — which helps to illustrate why Amazon is deserving of a premium.
Given Amazon’s triple-threat business, long track record of success, and appealing valuation, I believe Amazon has the potential for greater upside over the next 10 years than Nvidia.
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Danny Vena has positions in Alphabet, Amazon, Apple, Broadcom, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Broadcom and 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.
