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On Oct. 29, Amazon (NASDAQ: AMZN) CEO Andy Jassy made a claim no company has made before: "There has never been a trillion-dollar revenue business, and we may have two of them in the next five to ten years." He means Amazon Web Services (AWS), the company's cloud business, and its online stores (which include third-party seller services and physical stores).
Here's a simple way to think about Amazon right now: It isn't one bet on artificial intelligence (AI) or one bet on shopping. It's both, and both sides are getting stronger. That's why, if I could put $1,000 into just one "Magnificent Seven" tech stock today, it would go there.
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Microsoft and Alphabet are spending heavily on AI, too; Meta Platforms slid after its spending pushed cash flow negative; and Nvidia, Apple, and Tesla each lean hard on one big product or bet. None of these other Magnificent Seven has as many separate ways to grow as Amazon.
AWS rents computing power and storage over the internet, known as cloud computing, so businesses don't have to run their own servers. Last quarter, its sales jumped 39% to $46 billion, and Jassy expects more than 40% growth in both 2027 and 2028.
AWS's backlog -- the contracts customers have signed but not yet used -- hit $578 billion, more than double from a year ago. Jassy said Amazon installs an AI chip about every 14 seconds, and "almost as fast as we install capacity, customers are gobbling it up."
Here's the part I keep coming back to: Many of those chips are Amazon's own. Sales of its Trainium AI chips and Graviton processors are growing at triple-digit rates, and customer commitments for each are up more than 20 times from a year ago. Customers using them saved more than $2 billion in the third quarter alone, and Amazon plans to sell Trainium chips outside AWS in late 2027.
Most people think of Amazon's store as a grown-up business. I don't. Units sold are up nearly 15% this year, on top of more than 30 billion items sold last year, and nearly 80% of retail still happens in physical stores.
Fresh groceries and everyday essentials grew about three times faster than the rest of the store and now make up about half of all units sold. Grocery shoppers also buy from nearly four times as many other categories, like home goods and clothes.
Speed feeds that habit. More than 1.5 billion items reached Prime members the same day or overnight last quarter, according to the company, and orders through Amazon Now, its ultra-fast delivery service, are up 10 times from a year ago.
Every visit to the site is a chance to show an ad, and management expects ad revenue to grow in the high teens this quarter. Newer bets are moving, too: Amazon Pharmacy customers are up more than 60%, Amazon Leo internet satellites are on track to start service this year, and Zoox robotaxis now give paid rides in Las Vegas.
The catch is the bill. Amazon expects to spend about $220 billion this year, mostly on AI and data centers, and Jassy said 2027 spending will be "meaningfully more." That pushed free cash flow, the cash left after paying for new buildings and equipment, to an outflow of $42.4 billion over the past 12 months.
The stock trades around $267, below its 52-week high of $287.20, and the company is valued at about $2.89 trillion. That's roughly 28 times the profit Amazon earned from running its businesses over the past year. I can live with that. Building ahead of signed contracts is very different from building and hoping.
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Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.
Amazon Is the Only "Magnificent Seven" Stock I'd Buy With $1,000 Right Now was originally published by The Motley Fool
