Amazon AWS vs Alphabet Cloud Which Stock Wins AI Infrastructure Race

Amazon and Alphabet are both major players in the cloud computing space, but which stock makes the better investment after the recent AI infrastructure spending bill? Amazon’s cloud business, AWS, generated $42.2 billion in revenue and $16.6 billion in operating income during the June quarter, with a 39.4% margin. This marks a 37% year-over-year growth. In contrast, Alphabet’s Google Cloud reported $24.8 billion in revenue and $8.8 billion in operating income, with an approximately 35.6% margin, but its growth rate was much higher at 82%.

Despite AWS’s larger profit engine, Google Cloud’s rapid expansion offers potential for future gains. However, investors must consider the full companies, including their spending obligations. Amazon’s investment gains make its headline earnings appear cheap, but stripping those out reveals the true cost of AWS relative to the rest of Amazon’s business.

Alphabet trades at approximately 27.8 times trailing operating income on an enterprise-value basis, while Amazon trades at 30.3 times. Alphabet’s figure includes around $19 billion of preferred equity. Both companies have significant investment spending, with Alphabet raising additional equity and debt in June. The choice between the two depends on which company can improve its cash conversion and maintain durable margins.

Hedge fund positioning and short interest do not settle the debate. As of September 15, short interest was around 0.8% of Amazon’s float and 1.5% of Alphabet’s Class A float. The decision ultimately hinges on whether each new dollar of capacity begins generating enough additional cash to make the spending easier to fund.