Alphabet vs. Amazon: Which Stock Will Outperform in 2026?

Core Viewpoint - Amazon and Alphabet are leading players in the cloud computing market, with Alphabet's stock significantly outperforming Amazon's in 2025, climbing nearly 60% compared to Amazon's modest gains [1][3]. Alphabet's Case - Alphabet has transformed its image from an AI underperformer to a potential AI leader, significantly impacting investor perceptions [3]. - The company has advanced its Gemini foundational large language model (LLM) and custom AI chips, integrating these technologies across its products, which has boosted search revenue [4]. - Alphabet's Tensor Processing Units (TPUs) are gaining recognition as a top alternative to Nvidia's GPUs, with a notable $21 billion purchase commitment from Anthropic for the next year [6]. - The combination of high-quality AI chips and a leading LLM is expected to create a self-reinforcing advantage for Alphabet over time [7]. Amazon's Case - Amazon's recent performance has been less impressive, primarily due to AWS growth lagging behind competitors like Microsoft Azure and Google Cloud, although AWS revenue growth accelerated to 20% last quarter [9]. - The company is increasing its capital expenditure to meet rising demand for AWS services [9]. - Amazon's e-commerce segment is performing well, benefiting from robotics and AI investments, with North America revenue rising 11% and adjusted operating income increasing by 28% [12]. Verdict - Both Alphabet and Amazon are viewed as attractive investments heading into 2026, with forward price-to-earnings ratios below 30 and solid growth prospects [13]. - While Alphabet is expected to be a long-term AI winner, Amazon's stock is anticipated to outperform in 2026 as AWS revenue accelerates and Trainium gains traction, potentially shifting investor perceptions [15].