Amazon (NASDAQ:AMZN) crossed a market value of $3 trillion for the first time on August 3, with shares jumping 5% to a record $285.01. The stock is up more than 23% this year, and it took just over two years to add that latest trillion after Amazon first closed above $2 trillion in June 2024. Founder Jeff Bezos launched the company in 1994 as an online bookseller. Three decades later, it is cloud computing and AI, not e-commerce, that just pushed Amazon into this rarefied territory.
Bull Case: Cloud Computing Proved It Can Carry The Stock
The immediate spark was last week’s earnings report, when Amazon shares posted their biggest one-day jump since April 2012 after the company delivered its strongest cloud growth in more than 4 years (accelerating to 36.7%) and raised its annual capital spending forecast. Coming into that report, the biggest worry on investors’ minds was that hyperscalers were about to pull back on AI spending. Amazon’s numbers did the opposite.
Underneath that stock move sits a business that has quietly flipped its own script. Amazon Web Services generated 59% of the company’s operating profit in the first quarter, meaning the cloud unit, not the marketplace, now drives the bottom line. It also keeps adding customers: recent infrastructure and chip supply deals with OpenAI, Anthropic and Meta (NASDAQ:META) tie Amazon directly to the same AI boom that is driving up its own capital bill. Operating cash flow has been climbing too, evidence that this growth is showing up as real money rather than just on paper.
Bear Case: Spending Question Nobody Has Fully Answered
The other side of that story is the size of the check being written. Amazon is spending $220 billion on data center capital expenditures this year alone, a bet that only pays off if AI-driven cloud demand keeps growing into that spending rather than leveling off. AWS itself grew at a 36.7% clip over the same stretch, a strong number that still has to keep climbing to justify capital spending of that scale.
The risk is not hypothetical elsewhere in the industry. Alphabet posted negative free cash flow for the first time last quarter, and Meta’s free cash flow fell 91%. Both companies are pouring billions into similar AI buildouts without yet seeing much of it come back as cash. Amazon has avoided that fate so far, but the same spending pressure sits on its books. There is also a shift underway in how the market treats these stocks: megacap tech names used to move as one basket, and that is starting to break down, with individual earnings now driving individual stock moves. That is healthier for long-term investors, but it also means Amazon’s next quarter has to stand on its own.
What The Money Says About Amazon And Microsoft
Microsoft (NASDAQ:MSFT) now stands as AWS’s primary rival in cloud computing, backed by massive AI infrastructure spending. On July 30, Microsoft added nearly $450 billion in market value in a single session, reaching a $3.35 trillion market cap, after forecasting 45% Azure growth for its upcoming fiscal quarter to beat Wall Street estimates. Supporting this trajectory is a massive $627 billion commercial revenue backlog and $175 billion in planned 2026 CapEx, though Microsoft continues to face long-term friction as Copilot struggles against standalone AI tools and Azure’s massive baseline makes sustaining elevated growth rates mathematically harder.
Hedge fund ownership fell for both stocks earlier this year, from 381 to 353 funds in Amazon and from 312 to 282 in Microsoft. Short interest stays thin on each name, 1.09% of Amazon’s float against 1.24% for Microsoft, pointing to little organized bearish betting on either. The two diverge sharply on price: as of August 5, Amazon trades at 32.05x forward earnings versus Microsoft’s 23.58, a premium built on AWS staying ahead. Street has already responded to Microsoft specifically, with brokerages lifting its average price target to $560.90.
The Next Trillion Is a Different Kind of Test
Amazon’s move past $3 trillion rests on a straightforward bet: that AWS keeps converting AI demand into profit fast enough to justify both a premium price and a rising capital budget. The bull case is that the cloud business has already shown it can do exactly that, with profit and cash flow both moving in the right direction.
While we acknowledge the risk and potential of AMZN and MSFT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AMZN and MSFT and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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Disclosure: None.
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