Amazon and Alphabet, two dominant players in artificial intelligence, are poised for long-term growth despite recent stock surges. Both companies are making massive investments in AI infrastructure, with AWS and Google Cloud showing accelerating revenue growth.
While facing potential regulatory hurdles and current cash flow pressures from heavy spending, their strong core businesses and expanding cloud services suggest they are well-positioned to thrive over the next decade.
AI Powerhouses Amazon and Alphabet: Buy and Hold for the Next Decade?
Even after a stellar year, two AI giants, Amazon and Alphabet, present compelling long-term investment opportunities. Despite significant stock appreciation, the AI infrastructure build-out is still in its early stages, and these tech titans possess the financial might and diverse business models to not only endure but also flourish amidst rapid technological change. This article delves into why these companies are attractive buy-and-hold candidates for the next ten years.
Amazon: A Cloud Business Accelerating into the Future
At the core of Amazon's investment appeal is Amazon Web Services (AWS), its highly profitable cloud computing division. In the first quarter of 2026, AWS revenue surged 28% year-over-year to $37.6 billion, marking its fastest growth in over three years and an acceleration from previous quarters. This impressive growth on a massive scale, with an annual revenue run rate already exceeding $150 billion, highlights AWS's dominant position.
"It's very unusual for a business to grow this fast on a base this large,"
Adding to its strength, Amazon is developing custom chips like Graviton, Trainium, and Nitro, which are already generating over $20 billion annually with triple-digit growth. Its high-margin advertising business also saw robust growth, increasing 24% to over $17 billion in the quarter. These cash-generating engines are funding aggressive capital expenditures, with Amazon guiding for approximately $200 billion in capex for 2026. However, a potential risk is the current low trailing-12-month free cash flow of around $1 billion, indicating that spending might outpace short-term returns.
Trading at roughly 30 times earnings, Amazon's stock is not inexpensive, but its fundamental business outlook remains exceptionally strong.
Alphabet: Blazing Cloud Growth and a Resilient Core
Alphabet's growth trajectory is equally, if not more, impressive. Google Cloud experienced a remarkable 63% year-over-year growth in the first quarter, reaching $20 billion and becoming the fastest-growing major cloud platform. The company's Google Cloud backlog, representing contracted but unrecognized revenue, nearly doubled to over $460 billion, underscoring massive future potential.
"Our enterprise AI solutions have become our primary growth driver for Cloud for the first time... revenue from products built on our gen AI models grew nearly 800% year over year."
The core business is also thriving, with Google Search and other revenue up 19% year-over-year, defying concerns about AI chatbots impacting search dominance. Alphabet's total revenue grew 22% to $109.9 billion. Similar to Amazon, Alphabet is investing heavily in the future, raising its 2026 capital expenditures guidance to $180-$190 billion and planning an equity offering of over $80 billion. With a P/E ratio of approximately 27, Alphabet's stock, like Amazon's, is not cheap but reflects strong growth prospects.
The Long-Term Conviction: Why Hold Both?
Both Amazon and Alphabet are making substantial capital investments in AI, which is currently impacting near-term free cash flow. Regulatory scrutiny is another potential headwind for both companies as they continue to grow. Nevertheless, these companies represent two of the most robust businesses in the technology sector. Their dominant core franchises and still-accelerating cloud units position them favorably for the long AI era. If AI infrastructure development continues for another decade, as their aggressive spending suggests, both Amazon and Alphabet are well-poised for sustained growth. Investing in both for the long term, while managing position sizes due to inherent risks, appears to be a prudent strategy even after their significant recent gains.
