We recently published a list of 12 Best FAANG+ Stocks to Invest in Right Now. In this article, we are going to take a look at where Amazon.com, Inc. (NASDAQ:AMZN) stands against other best FAANG+ stocks to invest in right now.
The group of stocks formerly known as FAANG were synonymous with technological prowess, market dominance, and high growth. These companies provided exponential returns and offered the chance to be part of the technological revolution. Their rise to dominance was fueled by innovation, digital transformation, the increasing use of the internet, and their insatiable hunger for growth. In the process, they reshaped industries, altered consumer behavior, and redefined customer engagement. However, over the past couple of years, the acronym has lost some of its relevance as some names have changed and new companies have encroached on the territories of these mega-caps. As a result, the market has started using the term “Magnificent Seven” to better represent the most valuable tech stocks. In this list, we include the ‘Magnificent Seven’ plus five interesting stocks that focus on the transformational technology growth trends such as artificial intelligence, cloud computing, EV technology, and streaming.
Let’s begin by understanding the sheer magnitude of these stocks. We created an equal-weighted portfolio (equal investment in each stock) of all 12 mega-cap technology stocks in this list and compared their combined performance with the S&P 500 Index over the past 5 years. Astonishingly, the mega-caps portfolio has returned over 385% compared to the S&P 500 Index’s return of around 86%. Additionally, these 12 stocks now have a combined market cap of over $20.0 trillion, with around $14 trillion added in the past 5 years. In comparison, the total market cap of all US-listed stocks is approximately $60.5 trillion (as of December 2024; source: Wilshire 5000 Index), making these mega-caps account for nearly one-third of the total US market value. Although it’s not entirely fair to compare market caps to GDP, if we could, and if these 12 mega-caps formed a country, they would rival China as the second or third largest country by nominal GDP.
Despite recent intense competition, challenging market dynamics, and a difficult regulatory environment, these tech leaders still stand tall with their legacy of innovation and digital transformation. We believe their substantial investments in technology infrastructure, strategic acquisitions, international expansion, and continuous innovation have helped them maintain their dominance. Additionally, the rise of artificial intelligence and machine learning has opened new avenues for growth among these tech giants. With that, let’s explore these 12 stocks.
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Out Methodology
To identify the 10 best FAANG+ stocks, we compiled a list of U.S.-listed technology companies with largest market capitalization, along with the stocks from the FAANG acronym. Ultimately, the stocks were ranked in ascending order based on their market capitalization, with the stock having the highest market capitalization ranked at the top.
Note: All pricing data is as of market close on January 31.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Amazon.com, Inc. (NASDAQ:AMZN)
Number of hedge funds: 286
Amazon.com, Inc. (NASDAQ:AMZN) is involved in retail e-commerce, content subscription services (Prime Video), advertising, and cloud computing. The company’s product offerings through its online and offline stores include merchandise and media content acquired for resale, as well as products from third-party sellers. Additionally, Amazon.com, Inc. (NASDAQ:AMZN) operates one of the largest data center networks globally through its Amazon Web Services (AWS) division. AWS provides a comprehensive suite of cloud services, including computing power, storage options, and networking capabilities, catering to a diverse range of customers from startups to large enterprises.
AWS has been a significant driver of earnings growth for Amazon.com, Inc. (NASDAQ:AMZN), contributing around 60% of the total operating profit while accounting for just 17% of total revenue. With the increasing demand for cloud services and digital transformation across industries, AWS is expected to remain the company’s growth engine for many years to come. The robust profitability and cash flows from AWS also enable the company to fund its expansion, particularly in its fulfillment centers. The International and North American e-commerce businesses demonstrate strong operating leverage and have the potential to improve profits in the coming years.
Amazon.com, Inc. (NASDAQ:AMZN) is making significant advancements in AI, not just by enhancing its existing offerings, but also by investing in custom silicon chips like Trainium for training and Inferentia for inference. During its Q3 2024 earnings call, management indicated that the total capital expenditure for 2024 is projected to be around $75 billion, with the majority allocated to technology infrastructure and meeting AI-driven demand. The company anticipates increasing its investment even further in 2025.
Overall, AMZN ranks 5th on our list of best FAANG+ stocks to invest in right now. While we acknowledge the potential of AMZN to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.