Against the backdrop of elevated valuations for U.S. tech’s “Magnificent Seven,” the performance of Meta Platforms (META) and Amazon (AMZN) in 2025 has not been particularly stunning. While the S&P 500 has rallied more than 16% year-to-date, Meta and Amazon stocks have risen only about 4% and 7% since the start of the year, respectively.
However, Wall Street analysts recently suggested that these two stocks still possess at least 20% upside potential. How can these tech giants, each with a market capitalization exceeding $1.5 trillion, continue to find growth momentum at current valuation levels?
Meta Platforms: Attractive Valuation Supported by High Profitability Funding Strategic Investments
Although Meta’s stock price is down 20% from its all-time high, analysts point out that its investment value is becoming apparent. Market concerns about Meta primarily focus on its massive spending—the Reality Labs segment reported an operating loss of $4.4 billion in the third quarter, while investments in its AI labs continue to increase.
Yet, behind these investments lies Meta’s still-strong core business foundation: over 3.5 billion people worldwide interact with platforms like Facebook daily; the company’s Q3 operating margin reached a high of 40%, demonstrating the profitability of its advertising business; Meta returned $4.5 billion to shareholders in the quarter through share buybacks and dividends. More crucially, Meta currently has the lowest valuation among the “Magnificent Seven,” trading at just 24 times next year’s expected earnings. This valuation level contrasts with its solid cash flow generation capability and strategic layout, presenting a rare opportunity for investors.
Amazon: Cloud Business Drives Profit Growth, Ample Order Backlog
While Amazon’s retail business boasts quarterly revenue exceeding one trillion dollars, the true driver of its profitability is Amazon Web Services (AWS). AWS contributes two-thirds of the company’s operating profit, and its growth momentum remains robust. AWS revenue grew 20% year-over-year in the third quarter, a remarkable rate for a business with an annual revenue run rate over $100 billion. Furthermore, the growth in AI workloads is accelerating the trend of enterprises migrating to the cloud. By the end of Q3, the company held nearly $200 billion in performance obligations, most related to AWS, representing a 22% increase from the end of Q3 2024.
This substantial order backlog signals visible future growth for AWS, which in turn is expected to drive continued improvement in the company’s overall profits. Historical data shows a strong correlation between Amazon’s stock performance and operating profit growth, for which the current order scale provides solid support.
Re-examining the Investment Thesis
A common characteristic of both companies is that the market may be underestimating the enduring profitability of their core businesses and the long-term value of their emerging ventures. Meta leverages its global largest social networking platform to fund frontier exploration in the metaverse and AI while maintaining high profit margins. Amazon, through AWS’s leading position in cloud computing, firmly captures the dividends of enterprise digital transformation and AI development.
Although Meta and Amazon stocks have soared approximately 460% and 630% respectively over the past decade, analysts believe that, based on the profitability of their core businesses and the layout of new growth drivers, these two stocks still hold long-term investment value. In an environment where tech stock valuations are generally high, giant companies with clear profit paths and reasonable valuations remain a sound investment choice.
