Amazon Edges Out Microsoft as Top AI Investment

When it comes to artificial intelligence (AI), Amazon and Microsoft are two of the biggest names in the industry. Both companies have taken a similar approach, integrating AI into their own products while using other providers' models instead of creating their own. They also have thriving cloud computing businesses that benefit from rising AI workloads.

Microsoft has a broad business range, including business productivity software, gaming hardware and software, and cloud computing. Its iron grip in many industries makes it a safe investment, with a massive number of clients relying on its software. Amazon's commerce business is also popular, making it a safe bet for investors.

The two companies' cloud computing businesses are thriving, with each spending hundreds of billions to increase capacity to meet demand. However, Amazon's cloud computing division, AWS, posted 37% revenue growth in the third quarter, surpassing Microsoft's pace. This growth is expected to continue as AI spending and cloud computing rise.

Amazon also has an edge in operating profit growth, thanks to its higher-margin cloud computing business. While both companies have significant investments in private AI companies, Amazon's lead in growth cements its win in this category. Microsoft is the cheaper stock by one measure, but that makes sense given Amazon's growth rate.

While Microsoft remains a great investment with plenty of upside, Amazon looks like it has more near-term potential due to AWS' expected growth.