If I Could Buy Only 1 "Magnificent Seven" Stock Over the Next 10 Years, This Would Be It (Hint: Not Nvidia)

Despite Nvidia's (NVDA) current AI market dominance and significant stock appreciation, the article argues that Amazon (AMZN) offers a more attractive long-term investment opportunity among the Magnificent Seven. This is attributed to Amazon's pervasive application of AI across its e-commerce, advertising, and AWS cloud segments, which contributed to robust Q2 sales growth of 13% to $167 billion and a 33% EPS increase. The author highlights Amazon's appealing valuation at 33 times trailing-12-month earnings, significantly below its three-year average and a modest premium to the S&P 500, as a key factor for its potential future outperformance compared to Nvidia's already substantial gains and increasing competitive pressures.

Analysis

Nvidia maintains a dominant 92% market share in data center GPUs, crucial for AI models, and continues an aggressive annual release cadence for new AI-centric processors. However, competitive pressures are intensifying, with Advanced Micro Devices securing a 6-gigawatt deal and Broadcom a 10-gigawatt deal with OpenAI, signaling a strategic diversification by major AI consumers. Despite its leadership, Nvidia's stock has seen an extraordinary 1,150% increase since early 2023, suggesting a lower probability of replicating such performance.

Amazon is strategically positioned to leverage AI across its e-commerce, advertising, and AWS segments, with its CEO reporting over 1,000 generative AI services in progress. The company demonstrated robust Q2 financial performance, with overall sales increasing 13% year-over-year to $167 billion and EPS jumping 33% to $1.68. Key growth drivers included AWS, which grew nearly 18% to $31 billion, and advertising revenue, which surged 23% to almost $16 billion.

Amazon's current valuation stands at 33 times trailing-12-month earnings, less than half its three-year average and a slight premium to the S&P 500's multiple of 31. This appealing valuation, combined with its diversified "triple-threat" business model and proven track record (656% return over a decade), positions Amazon for potentially greater long-term upside compared to Nvidia.

Key Decisions for Investors

• Evaluate Amazon's long-term growth potential, considering its diversified application of AI across e-commerce, advertising, and AWS, and its current attractive valuation relative to historical averages and the broader market.
• Monitor the evolving competitive landscape in the AI chip sector, as increased deals with Nvidia's rivals like AMD and Broadcom suggest potential market share shifts or diversification by major AI developers.
• Assess the sustainability of Nvidia's extraordinary growth trajectory, acknowledging its significant past appreciation and the increasing competition, which may temper future returns compared to its historical performance.