The current spotlight in the tech world is undoubtedly on Nvidia, a company riding the wave of AI computing chips and rapidly joining the elite $3 trillion market cap club alongside Apple, Microsoft, and Alphabet. Investors widely believe that the massive demand for AI computing power will drive soaring profits for related companies. However, amidst this euphoria, the market seems to have underestimated a key beneficiary of this growth—Amazon. With a market capitalization already at $2.5 trillion, this company is quietly building momentum through the deep collaboration between its cloud computing arm, AWS, and AI startup Anthropic, coupled with the vast application scenarios within its e-commerce and media businesses. Based on its current market cap and growth potential, it is highly probable that Amazon will break through the $3 trillion market cap barrier by 2026.
As the pioneer of cloud computing services, Amazon AWS has appeared relatively low-key in the competition of the AI era. Competitors have been active: Microsoft’s alliance with OpenAI has significantly boosted the growth of its Azure cloud business, while Oracle surprisingly secured a major contract with OpenAI. However, AWS’s strategy focuses more on return on investment, and its chosen AI partner is Anthropic. This AI software provider, specializing in the enterprise and programming markets, is experiencing explosive revenue growth, with its annual recurring revenue skyrocketing from $1 billion to $5 billion in a short period. As Anthropic’s primary cloud service provider, Amazon will receive billions in training and computing expenditure from them; the two are even collaborating on developing custom chips to challenge Nvidia. Although AWS’s 17% revenue growth last quarter temporarily lags behind some competitors, its massive base of over $123 billion in annual recurring revenue and a high operating margin of 37% suggest that as Anthropic enters a phase of rapid growth, AWS’s revenue growth rate is expected to accelerate significantly in the coming quarters, becoming the core engine of Amazon’s overall profitability.
The dividends of AI are not confined to AWS alone. Within Amazon’s vast retail and media empire, AI is becoming a powerful tool for enhancing efficiency and profitability, particularly evident in its rapidly growing advertising business. This segment is currently maintaining a 22% year-over-year growth rate with impressive margins. Amazon recently launched AI-powered ad creative tools for merchants, significantly lowering the barrier for small and medium-sized businesses to create and launch high-quality advertisements, which will substantially expand the potential market for its advertising services. Leveraging its global e-commerce platform, Amazon can precisely connect sellers with buyers, and AI’s enabling role extends far beyond this. From warehouse robots and logistics optimization to enhancing the customer search experience, artificial intelligence will comprehensively improve the efficiency and appeal of its e-commerce ecosystem, thereby pushing the current retail business margin of just 7.5% upwards.
In summary, immense profit growth potential is the key driver pushing Amazon towards a $3 trillion market cap. Over the past 12 months, the company’s EBIT has surged to $77 billion. As AWS revenue growth accelerates and the retail business continues to improve, driven by high-margin segments like advertising, its annualized EBIT is expected to surpass the $100 billion mark by 2026. For a high-quality enterprise like Amazon, with its strong moat and growth prospects, a valuation multiple of 30 times is entirely reasonable. Based on this calculation, $100 billion in profit corresponds to a $3 trillion market capitalization. The math behind this is clear and straightforward, making Amazon an highly attractive AI-themed stock in any current investment portfolio.
