Now, Jim Cramer – a fellow whose enthusiasm for the stock market is, let’s just say, noticeable – has been touting Alphabet and Amazon. He’s had a good run, mind you – 24% annual returns for 14 years isn’t something to sniff at, even if it was before 2001 (a different era entirely, financially speaking). So, when he suggests buying, it’s worth a glance. And, as it happens, most of Wall Street seems to concur. Both stocks have taken a bit of a tumble recently, which, as any seasoned investor knows, can present a rather tempting opportunity.
Analysts, those oracles of the financial world, are collectively predicting Alphabet could climb 29% from its current price, hitting $385 a share. Amazon, meanwhile, is eyed for a 31% jump to $285. Of course, predictions are a bit like weather forecasts – useful, but rarely entirely accurate. Still, it’s a good starting point for a bit of digging.
Alphabet: Beyond the Search Box
Alphabet, you see, isn’t just Google. It’s a sprawling empire of digital advertising and, increasingly, cloud computing. They’re the biggest player in ad tech, and a solid third in the cloud business. And, crucially, they’re rather good at artificial intelligence. Now, AI is the buzzword du jour, and for good reason. It’s going to change everything, including how we search for things. Google Search, unsurprisingly, is adapting. Their AI-powered features – AI Mode and AI Overviews – are, according to their CEO Sundar Pichai, “driving greater usage.” Which is a polite way of saying people are actually using them.
Google Cloud, while still trailing Amazon Web Services and Microsoft Azure, is gaining ground. They’ve been building custom AI accelerators called Tensor Processing Units (TPUs). Apparently, these chips are rather clever. So clever, in fact, that Alphabet now rents them out. Meta (Facebook to you and me) and Anthropic have signed multi-billion dollar deals to use them. It’s like running a very sophisticated, very expensive tool rental shop. Wall Street expects Alphabet’s earnings to grow 11% a year through 2027. That makes the current valuation of 28 times earnings look a little rich, perhaps, but analysts have a habit of underestimating this company. They’ve beaten earnings estimates by an average of 15% in the last six quarters. A pattern, if you will.
Amazon: More Than Just Packages
Amazon, of course, is the online shopping behemoth. But it’s also a major player in digital advertising and, yes, cloud computing. They’re leaning heavily on AI to boost growth in all three areas. In retail, it’s about reducing costs – optimizing inventory, streamlining delivery routes. It’s rather ingenious, really. Amazon Web Services (AWS) dominates the cloud market, with a 41% share. Andy Jassy, Amazon’s CEO, points out that AWS is where most companies store their data, making it the natural place to run AI applications. It’s a bit like having the best real estate in the digital world.
They’ve also developed their own custom AI accelerators – Trainium and Inferentia. OpenAI, the folks behind ChatGPT, recently agreed to consume 2 gigawatts of Trainium capacity. That’s a lot of computing power. Jassy says these chips are generating an annual revenue run rate of $10 billion and growing at a triple-digit percentage. It’s a remarkable feat of engineering, and, frankly, a little intimidating. Amazon’s stock has dipped 15% from its high, partly due to plans for a massive $200 billion capital expenditure in 2026. But I suspect investors are overreacting. Heavy spending on AI infrastructure is precisely what’s needed, and Jassy says AWS is monetizing cloud computing capacity as fast as they can install it. Morgan Stanley recently called Amazon the most underappreciated generative AI winner. A bold claim, perhaps, but not entirely unreasonable.
Wall Street expects Amazon’s earnings to grow 15% annually through 2027. The current valuation of 30 times earnings looks reasonable, especially considering they’ve beaten earnings estimates by an average of 19% in the last six quarters. The current price, therefore, seems like an attractive entry point for long-term investors. It’s a bit like finding a good book – you know it’s going to be a worthwhile journey, even if you don’t know exactly where it will lead.
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2026-03-06 12:23