Amazon Web Services (AWS) is a vital component of the AI investment thesis. Amazon’s profits are growing faster than its revenue, and both companies are valued similarly. Billionaire Steve Mandel’s hedge fund, Lone Pine Capital, has outperformed the market, with Mandel recently selling off some Microsoft shares to invest in Amazon, a promising AI stock.

Amazon’s profits are boosted by AI-related revenue streams, with AWS experiencing a significant rise in sales during Q2, reaching $30.9 billion. While AWS’s growth is slightly slower than its competitors, its superior margins contribute significantly to Amazon’s total operating profit. AWS’s success in the AI space makes it a strong stock pick.

Despite trading at expensive levels for growth, Amazon and Microsoft have similar forward price-to-earnings ratios. Amazon’s steady margin improvement, particularly in AWS and advertising services, sets it apart from Microsoft. This trend is expected to continue, making Amazon a compelling long-term investment over Microsoft in terms of profit growth.

The Motley Fool Stock Advisor team has identified 10 top stocks for investors to buy now, with Amazon not included in the list. However, Amazon’s profits are projected to grow rapidly compared to Microsoft, making it a solid AI pick. Stock Advisor has a total average return of 1,049%, outperforming the S&P 500. Investors are encouraged to consider the latest top 10 list from Stock Advisor for potential high returns.

Read more at Yahoo Finance: Billionaire Steve Mandel Just Sold Microsoft Stock to Buy This Dominant Artificial Intelligence (AI) Stock Up Nearly 800% Over the Past Decade