Diversified Tech Giants Outshine Electric Car Maker

The tech sector has outperformed other sectors in the past decade, with the S&P 500's tech sector up 771% since August 21. Amazon (AMZN) and Microsoft (MSFT) are two stocks that investors can consider adding to their portfolios. Both companies have diversified businesses, with core foundations in e-commerce for Amazon and software for Microsoft.

Amazon's e-commerce business generates revenue needed for investments and expansion, while its cloud services, Amazon Web Services (AWS), generate profits. In the second quarter, AWS accounted for 61% of Amazon's operating income but only 21% of its revenue. Cloud computing is a key growth driver for both Amazon and Microsoft.

Microsoft's 'Intelligent Cloud' segment, which includes Azure, brought in $39.3 billion in revenue in the most recent quarter, up 32% year over year. In its latest fiscal year, Azure achieved its first $100 billion year, and the Microsoft Cloud segment as a whole generated $214 billion.

Tesla (TSLA), on the other hand, is one stock that investors may want to avoid. The company's valuation relative to its execution timeline for long-shot projects like robotaxis and humanoid robots is hard to justify. At over 205 times its projected earnings for the next 12 months, Tesla's valuation seems unsustainable.