Why These Two Growing Stocks Are Quietly Dominating AI Investments

The artificial intelligence boom has created an investing paradox. While pure-play AI companies have captured headlines, many remain unprofitable, overvalued, or entirely dependent on a single product. Yet the real AI stories aren’t found in flashy startups—they’re embedded in the everyday tools you already use. And they’re coming from two tech titans: Amazon and Microsoft.

The Real AI Play Isn’t Where You Think It Is

When investors hunt for AI opportunities, they often chase the new and shiny. But that approach carries real dangers: concentration risk, unprofitable business models, and astronomical valuations that leave little room for growth.

The smarter strategy? Look for companies that are infrastructure builders AND distribution powerhouses. That’s exactly what Amazon and Microsoft are doing. They’re not just profiting from AI—they’re weaving it into the platforms billions of people already depend on daily.

Amazon: When the Profit Engine Runs on Intelligence

Most people associate Amazon with retail. But the real money machine is Amazon Web Services (AWS), the cloud division that’s becoming the company’s primary profit driver.

Here’s the financial reality: In Q3, Amazon posted $180.2 billion in total revenue (up 13% year-over-year), but AWS specifically surged to $33.0 billion—a 20.2% acceleration from the prior quarter’s 17.5% growth. More telling: AWS contributed $11.4 billion in operating income, representing 66% of Amazon’s total operating profits.

Management is positioning AI as a company-wide transformation, not just a cloud story. CEO Andy Jassy emphasized: “We continue to see strong momentum and growth across Amazon as AI drives meaningful improvements in every corner of our business.”

The commitment is massive. Operating cash flow climbed 16% to $130.7 billion, yet free cash flow actually declined to $14.8 billion from $47.7 billion year-over-year. Why? A $50.9 billion surge in capital expenditures—primarily data centers and computing infrastructure needed to power AI workloads. This represents one of these growing stocks’ largest infrastructure bets in years.

Microsoft: Cloud Growth Hitting Another Gear

Microsoft’s AI advantage mirrors Amazon’s but operates through a different lens. Azure—Microsoft’s cloud equivalent—is experiencing explosive momentum. The company recently reported Q1 fiscal 2026 revenue of $77.7 billion (up 18% year-over-year) with operating income jumping 24% to $38.0 billion.

But the headline number tells only half the story. Azure and related cloud services posted 40% growth year-over-year, accelerating from 39% in the prior quarter. This isn’t just growth—it’s accelerating growth, suggesting AI-driven demand is intensifying.

Like Amazon, Microsoft is aggressively spending to meet capacity demands. Fiscal Q1 capital expenditures reached $34.9 billion, driven by “growing demand for our cloud and AI offerings,” management disclosed. More importantly, the company signaled that capex will increase further throughout fiscal 2026, with growth rates outpacing fiscal 2025 levels.

The commercial obligation backlog validates this approach. Microsoft’s commercial remaining performance obligations (RPOs)—essentially contracted future revenue—surged 50% year-over-year to exceed $400 billion. That’s not speculative growth; that’s pre-sold demand.

Two Different Paths, Same Destination

Both Amazon and Microsoft share a fundamental advantage: they’re already massive, profitable businesses layering AI capabilities onto their existing foundations. Unlike pure-play AI companies betting on unproven models, these are established profit machines accelerating through intelligent automation.

The Trade-Offs Matter

The bull case is straightforward: two world-class growing stocks entering a new era of capability expansion. The risk is equally clear: AI infrastructure is capital-intensive, and capital-intensive projects don’t always deliver expected returns.

Current valuations reflect this ambition. Amazon trades at a 29x forward P/E ratio, while Microsoft commands 30x—premium valuations for premium companies. Given the spending intensity and potential execution risks, investors should probably avoid outsized positions.

That said, the math is compelling. If these massive infrastructure investments pay off—and early indicators suggest they will—the efficiency gains could accelerate earnings growth significantly beyond current expectations. For long-term investors, that potential payoff justifies the premium.

The AI revolution won’t be won by the flashiest startups. It’ll be won by the companies that make AI work for billions of people every single day. And right now, those are the only two growing stocks that truly fit that description.