AI Spending Could Soar 600%: 2 Brilliant AI Stocks to Buy Now, According to Wall Street (Hint: Not Nvidia or Palantir)

Morgan Stanley forecasts over 600% growth in AI spending across software and internet companies by 2028, significantly boosting U.S. economic growth. Amazon and HubSpot are highlighted as key beneficiaries, with Amazon leveraging AI in AWS and retail to deliver strong Q2 results (sales +13%, EPS +34%) and HubSpot's Breeze AI platform driving robust Q2 performance (revenue +19%, EPS +13%). Analysts consider both stocks undervalued, projecting 14% and 31% upside for Amazon and HubSpot, respectively.

Analysis

A potent combination of macroeconomic tailwinds and strong corporate execution is highlighted for Amazon (AMZN) and HubSpot (HUBS), both positioned as key beneficiaries of a projected 600% surge in AI-related spending by 2028, according to Morgan Stanley. This trend is already adding more than a percentage point to U.S. economic growth, outpacing consumer spending. Amazon demonstrated its AI prowess in strong second-quarter results, with sales growing 13% to $168 billion and GAAP EPS rising 34% to $1.68. This was driven by AI integration across its retail business, which uses 1,000 generative AI applications to optimize logistics, and its AWS segment, which is innovating with custom chips and its Bedrock development platform. Despite a seemingly high valuation at 35 times earnings against a 10% annual growth forecast, Amazon has consistently beaten consensus estimates by an average of 22% over the last six quarters, suggesting analyst models may be too conservative. Similarly, HubSpot's solid Q2 performance, with revenue up 19% to $761 million and non-GAAP EPS up 13% to $2.19, was directly attributed by its CEO to the strong adoption of its Breeze AI features. While its valuation of 61 times earnings is also elevated, Wall Street projects 22% annual earnings growth through 2026, and the company has a track record of consistently beating estimates. Analyst price targets imply a 14% upside for Amazon and a more substantial 31% upside for HubSpot, underscoring the market's bullish outlook on their respective AI strategies.

Key Decisions for Investors

• Investors should consider the broader macroeconomic signal that AI spending is now a primary driver of U.S. economic growth, justifying a strategic allocation to companies with proven AI monetization, such as Amazon and HubSpot.
• For Amazon, the high valuation of 35 times earnings should be assessed in the context of its 22% average earnings beat over the last six quarters and AI-driven growth in AWS and retail, suggesting the 14% upside to the median analyst target may be achievable.
• For HubSpot, the 61 times earnings multiple presents a valuation risk, but this is counterbalanced by a 22% projected annual earnings growth rate and a significant 31% implied upside to the median analyst price target, making it a candidate for growth-focused portfolios.
• Monitor both companies' future earnings for continued outperformance relative to consensus estimates, as the current bullish thesis is heavily dependent on their ability to maintain a trajectory that exceeds Wall Street's base-case forecasts.