Both Amazon.com (NASDAQ: AMZN) and the warehouse retailer Costco (NASDAQ: COST) are well-known consumer goods and retail companies. However, when examining their profit drivers, Amazon's identity is far more rooted in technology than in retail. Its operations span cloud computing, in-house chip design and manufacturing, and AI computing infrastructure accessible across various industries.
Over the past three years, the AI wave has significantly boosted the share prices of many tech stocks. By conventional logic, Amazon's stock performance should have substantially outperformed Costco's. This assumption holds true, but the actual difference in returns from a $5,000 investment in each company three years ago might be more surprising than expected.
Comparing Current Asset Values from $5,000 Initial Investments
First, consider the adjusted closing prices (accounting for splits and dividends) for both stocks on July 14, 2023:
Stock / Adjusted Closing Price on July 14, 2023
Amazon.com: $134.68
Costco: $525.24
Utilizing the fractional share trading mechanism available in U.S. markets, a $5,000 investment on July 14, 2023, would have purchased approximately 37.1 shares of Amazon or 9.5 shares of Costco.
Calculating the current market value of these initial investments based on the adjusted closing prices on July 14, 2026, yields the following:
Amazon.com: $9,186
Costco: $8,756
Many may find it surprising that the return from investing in Amazon did not vastly outpace that from Costco. This is not a critique of Costco—the company has strong long-term prospects, featuring a recession-resistant business model, a highly loyal customer base, a stable regular dividend, and occasional special one-time payouts.
Nevertheless, from a three-year forward investment perspective, Amazon remains the more favored choice.
The Primary Growth Catalyst: Cloud Computing
Comparing traditional valuation metrics, Amazon currently trades at a lower valuation than Costco.
Amazon's forward price-to-earnings ratio is 29.2, while Costco's forward P/E is significantly higher at 41.1. This lower valuation, combined with a broader revenue growth runway, makes Amazon a more compelling investment proposition.
Amazon is the global leader in cloud computing infrastructure. In the first quarter of 2026, its Amazon Web Services (AWS) division held a 28% share of the global market, with Microsoft Azure in second place at 21%.
AWS generated annual revenue of $128.7 billion in 2025. Benefiting from the expansion of the AI industry, its revenue is projected to continue rising in the coming years. A research report predicts the global cloud computing market will surpass $2 trillion by 2030, with 10% to 15% of that spending dedicated to generative AI-related services.
Amazon is also concurrently developing its own proprietary AI accelerator chips, which can meet customer demand at lower computing costs, further solidifying AWS's industry advantage.
Objectively, it must be noted that Amazon and other hyperscale cloud providers are currently investing unprecedented capital to build out AI infrastructure. To maintain investor confidence, these massive capital expenditures must ultimately deliver on two key outcomes: boosting operating profit margins and unlocking new revenue streams, with the optimal scenario being the simultaneous achievement of both.
If Amazon continues to lead the global cloud market and subsequently demonstrates that its AI infrastructure investments yield the expected returns, long-term shareholders in the company stand to be handsomely rewarded.
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