Amazon(US:AMZN) The Motley Fool·2026-01-07 01:15Core Viewpoint - The article discusses investment opportunities in Alphabet and Amazon, highlighting their discounted valuations and potential for market-beating returns as they leverage AI innovations. Group 1: Alphabet - Alphabet has made significant investments in AI, pledging between $91 billion and $93 billion in capital expenditures last year, which are starting to yield positive results [3][4] - The company reported nearly $74 billion in free cash flow in Q3, indicating strong financial health despite heavy investments in AI [4] - Berkshire Hathaway increased its stake in Alphabet by acquiring over 17.8 million shares in Q3 2025, making it nearly 2% of its portfolio [5] - Alphabet's current P/E ratio of 31 aligns with the S&P 500 average, positioning it as the second-cheapest stock among the "Magnificent Seven" [5] Group 2: Amazon - Amazon has invested $120 billion in capital expenditures over the past year, focusing on AI to enhance its e-commerce and cloud services [8] - Despite the substantial investment, Amazon generated $15 billion in free cash flow, showcasing its ability to maintain profitability [8] - The stock has recently plateaued due to increased competition in the cloud segment from Google Cloud and Microsoft Azure, impacting investor sentiment [9] - Amazon's shares are currently trading at a P/E ratio of 32, making them only slightly more expensive than Alphabet, presenting a potential buying opportunity [11][12]