If you’re looking to invest in a company likely to benefit from artificial intelligence (AI) today and down the road, you may consider buying a “Magnificent Seven” stock. With a moniker inspired by the 1960 Western, these players are technology leaders, and each is investing in the area of AI. The one that has become almost synonymous with this hot technology is Nvidia because this company’s chips power AI — and dominate the industry.

Though Nvidia makes a great buy, another stock could make an even better AI bet right now. That’s because this company is likely to benefit from Nvidia’s strength as well as its own AI products and services — and it’s involved in two other high-growth businesses. On top of this, this company uses AI to streamline its operations, which should lead to earnings gains in the coming years. So, investing in this player gives you a complete AI package and more. Let’s take a close look at this AI powerhouse to buy now.

AI-powered robots work on laptops in a conference room.

Image source: Getty Images.

A leader in two growth markets

And this top stock is Amazon (NASDAQ: AMZN), a leader in the growth markets of e-commerce and cloud computing. Amazon is positioned to win in these two markets thanks to its earnings track record and leadership in these areas as well as moves it made in recent times to favor growth.

Faced with rising inflation back in 2022, Amazon posted its first annual loss in nearly a decade. Higher costs weighed on customers’ wallets and on the company’s costs. But Amazon quickly turned things around by revamping its cost structure and shifting investment into growth areas like technology infrastructure.

The efforts worked, helping Amazon to report double-digit revenue gains last year and a tripling of operating income. The company also shifted to an inflow of cash of more than $36 billion from an outflow a year earlier. Amazon’s cost cuts, moves to become more efficient across its fulfillment network, and expansion of Amazon Web Services’ (AWS) offerings helped the company manage during tough times and recover.

And, importantly, these efforts should help Amazon thrive in better times, as an improved cost structure will favor earnings growth. For example, in the U.S., Amazon has shifted from a national to a regional fulfillment model, a move that’s lowering its cost to serve.

Amazon’s AI potential

So, without even considering Amazon’s presence in AI, the stock already looks attractive — but it’s AI potential makes the picture even brighter. Amazon is set to benefit from AI in two ways. The company uses AI to gain in efficiency and optimize the shopping experience for customers. For instance, AI designs the best delivery routes to get packages to their destination fast, and AI suggests items for customers based on their previous purchases. These and other AI-powered moves lower Amazon’s costs, and by satisfying customers, keep them coming back.

And the second way Amazon should score an AI win has to do with AWS. The cloud service will benefit from Nvidia’s successes because it offers customers Nvidia chips and services. So, businesses looking to get in on Nvidia AI products can do so right through AWS. And AWS also offers a variety of its own products and services, from its chips for training and inference to a fully managed service that gives customers access to top large language models.

The AWS customer

This means AWS could serve all or most of customers’ AI needs, making it a go-to place for those developing AI projects. And since AWS is the world’s leading cloud company, it already has a huge audience — an AWS customer interested in launching AI is more likely to do so through AWS than turning to another cloud provider.

Amazon over the years has proven its strength by growing earnings — and in recent times demonstrated its ability to manage tough periods and come out a winner. And its investment in AI and leadership in cloud services should help it to win in this promising technology too. Amazon trades for 42x forward earnings estimates, which is reasonable considering its dominance in its markets and its AI prospects. That’s why this Magnificent Seven stock could be the best AI bet right now — and one you’ll want to hold onto for the long term.

Should you invest $1,000 in Amazon right now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.

This “Magnificent Seven” Stock Could Be the Best Artificial Intelligence (AI) Bet Right Now (and It’s Not Nvidia). was originally published by The Motley Fool

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