Zacks Investment Ideas feature highlights Amazon, Microsoft, Alphabet, Marvell and Broadcom

For Immediate ReleaseChicago, IL – February 11, 2025 – Today, Zacks Investment Ideas feature highlights Amazon AMZN, Microsoft MSFT, Alphabet GOOGL Marvell Technology MRVL and Broadcom AVGO.Amazon's $100B AI Bet: Bold Move or Too Much?Amazon didn’t hold back during Thursday’s earnings call, unveiling a capital spending program that stunned investors. The e-commerce and cloud computing giant not only reported stronger-than-expected quarterly earnings but also delivered 10% year-over-year sales growth—right in line with analyst projections.But the real headline was Amazon’s AI investment plans. In the most recent quarter, Amazon spent a staggering $26.3 billion on capital expenditures, signaling an intent to maintain that pace. That translates to more than $100 billion in annual capex, with the bulk of it dedicated to AI infrastructure.Amazon is doubling down on a trend sweeping through the mega-cap tech world, where hyperscalers are making massive AI infrastructure bets. Microsoft has committed $85 billion to capex, and Alphabet $75 billion. These investments are so significant that, according to BlackRock, the Magnificent 7’s capital expenditures now surpass the US government’s R&D spending.Amazon’s stock, along with the rest of the Magnificent 7—has delivered outstanding performance in recent years. But will shareholders embrace this unprecedented spending spree, or will concerns about capital allocation start to weigh on the stock? Let’s dive into the implications of Amazon’s AI gamble.How Will This Affect AMZN, GOOGL and MSFT Stock?For the record, I’m a firm believer in the AI boom and its transformative potential. I was an early adopter of large language models (LLMs) and continue to use them regularly across multiple domains. Not only are these tools bafflingly useful, but they are also improving almost weekly. For those still skeptical, just look at OpenAI’s recent release of ‘Deep Research’, a specialized AI model capable of conducting multi-step, high-level analysis.I bring this up because my outlook on Amazon and the broader Magnificent 7 may seem counterintuitive given my enthusiasm for AI. I do believe that this massive capex push will ultimately generate significant returns, but the path there won’t be easy—especially for shareholders in the near term. Spending $100 billion annually is a staggering number, and it may not be immediately clear how this will translate into higher profitability in the near term.Amazon, Alphabet and Microsoft have been market leaders, generating strong returns over the past two years. But this new spending wave raises a critical question: will Wall Street reward or punish these companies for prioritizing AI infrastructure over immediate earnings growth?For concerned investors, there appears to be some downside protection as well. These AI and cloud investments, while expensive, still align with the core business models of Amazon, Microsoft and Alphabet—all of which rely heavily on cloud computing, digital, and AI-driven services. Even in a worst-case scenario where AI doesn’t revolutionize their businesses as expected, these companies will still emerge with significantly expanded data center capacity.It is also worth noting that these investments, as large as they seem, represent roughly one year’s worth of profits for these companies. That’s a testament to the insane cash flow generation of mega-cap tech. They are spending aggressively because they can—and because they believe it will pay off.The bottom line? Amazon, Microsoft and Alphabet are making a long-term bet that could reshape their futures—but the near-term stock reaction may be choppy. Investors should be prepared for volatility, but history suggests that those who stay the course with these tech giants often reap the rewards.What Stocks Can Investors Buy Instead? (MRVL and AVGO)Two stocks that have been on my radar as huge beneficiaries of the ongoing AI investment boom are Marvell Technology and Broadcom. While Nvidia dominates the AI hardware narrative, considerable spending from big tech will also flow into complementary AI solutions—particularly custom application-specific integrated circuits (ASICs) designed by Marvell and Broadcom. These ASICs don’t compete directly with GPUs but instead allow hyperscalers to broaden their AI capabilities, optimizing costs, efficiency, and performance for specialized workloads.Marvell has secured a major partnership with AWS, supplying custom AI chips that enhance efficiency and reduce reliance on GPUs in hyperscale data centers. Meanwhile, Broadcom has deepened its relationship with Apple, providing custom AI and networking chips as Apple expands its AI capabilities. Both companies are key players in the shift toward specialized AI hardware, enabling hyperscalers and tech giants to build more efficient, scalable AI infrastructure.Both stocks also hold Zacks Rank #2 (Buy) ratings, reflecting upward-trending earnings revisions as AI spending accelerates. Furthermore, they have been two of the best performing semiconductor stocks in the sector. This relative strength gives me further confidence in their leadership.AI Stock Opportunities Going ForwardAmazon’s $100 billion AI investment along with the rest of the hyperscalers is a bold, high stakes bet that will take years to fully materialize. While the long-term payoff could be massive, the near-term stock reaction may be uncertain as investors digest the impact of such aggressive spending. History has shown that big tech’s willingness to invest ahead of the curve often pays off, but shareholders will need patience.For investors looking to dampen the effects of near-term uncertainties of this shift, Marvell Technologies and Broadcom may offer an opportunity to benefit from the ongoing AI infrastructure buildout.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis Report Marvell Technology, Inc. (MRVL): Free Stock Analysis Report Broadcom Inc. (AVGO): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks