Nvidia (NASDAQ:NVDA) stock is an obvious bet to capitalize on the growth potential of the transformative AI (Artificial Intelligence) technology. However, with a year-to-date rally of about 207%, NVDA stock’s valuation might not be enticing near the current levels. Nonetheless, if you’ve missed the remarkable rally in NVDA, consider investing in shares of Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG) and Amazon (NASDAQ:AMZN). Morgan Stanley analyst Brian Nowak believes both companies are well-positioned to seize the AI opportunity.
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In a note to investors dated October 1, Nowak said that the addressable market for generative AI enterprise software remains large, providing multi-year growth opportunities for companies, including Google Cloud and Amazon Web Services. Nowak is bullish about GOOGL and AMZN stocks.
With this backdrop, let’s consider why Google and Amazon are top AI bets.
NVDA’s Soaring Valuation Calls For Alternatives
Google Cloud highlights that its AI and machine learning products and solutions help build generative AI applications quickly and efficiently. Thomas Kurian, the CEO of Google Cloud, said during the Goldman Sachs Communacopia & Technology Conference that AI would require large-scale infrastructure, and Google has been building it. Kurian added that 70% of AI unicorns use Google Cloud, and over 50% of all funded AI companies are its customers.
The company also introduced a series of AI-powered functionalities across its products, encompassing Workspace Collaboration, Data and AI, Infrastructure, and Cybersecurity solutions.
Regarding Amazon, its Amazon Web Services (AWS) continues to dominate the cloud infrastructure industry. During the Q2 conference call, AMZN’s CEO Andrew Jassy said that AWS is the leader in the cloud space with the most extensive customer base, “size of partner ecosystem, breadth of functionality, and the strongest operational performance.”
Further, Amazon has invested heavily in AI and is leveraging Nvidia’s H100 GPUs (Graphics Processing Unit) to develop generative AI applications.
While Google and Amazon are leading the cloud infrastructure space needed to modernize IT systems, train AI models, and develop AI applications, let’s look at what the Street recommends for their shares.
Is Alphabet Stock a Buy, Sell, or Hold?
With Google at the forefront of transformative technological advancement, analysts maintain a bullish outlook about its prospects. With 31 Buy and four Hold recommendations, Alphabet stock has a Strong Buy consensus rating.
Analysts’ average price target of $150.67 implies 12.3% upside potential from current levels.
Is Amazon a Buy or a Sell Right Now?
With 40 Buy and one Hold recommendations, Amazon stock is a Strong Buy (based on consensus rating). Further, analysts’ 12-month average price target of $176.02 implies an upside of 35.96% from current levels.
Bottom Line
Google and Amazon are leading companies in the cloud space and are poised to capitalize on AI-led opportunities. Both companies sport a Strong Buy consensus rating on TipRanks. However, Amazon stock offers a higher upside potential from current levels (based on analysts’ consensus price targets) when compared to Google.
