To The Moon

The Real AI Arms Race Isn’t Flashy—It’s Infrastructure

When people talk about artificial intelligence, the conversation often drifts to chatbots and sci-fi headlines—but the real battleground is buried in data centres and silicon. This is where Amazon and Alphabet are quietly (and expensively) fighting to become the backbone of AI’s future. Both firms have the vision, the capital, and the compute muscle—but they’re playing different games to win.

The real AI war is waged in cloud infrastructure grids

At first glance, Amazon looks like the obvious front-runner. It’s planning to deploy a staggering $100 billion in capital expenditures this year, with most of it going toward Amazon Web Services (AWS). That figure alone would make most CFOs break into hives, but for Amazon it’s a strategic wager on becoming the infrastructure layer for generative AI globally. If Anthropic, one of its key AI partners, continues scaling at the current pace, AWS could end up hosting and monetising entire AI economies. Not bad for a company that started with books.

And here’s the kicker many investors may not realise—AWS now generates over $42 billion in annual operating income. That’s more than the GDP of some countries. Margins in cloud computing aren’t just good, they’re exceptional, especially as AI workloads shift from experimentation to production. Amazon's cloud growth has picked up again, now running at 17% year-on-year, which is impressive given the scale. This isn’t just growth—it’s high-margin, recurring, enterprise-grade growth. With that kind of cash flow, even a forward P/E near 32 doesn’t look too inflated.

Investors have been building strongholds at key price levels, and the chart below shows where institutional conviction around AWS’s future is stacking up.

Heavy volume clusters reveal AWS-backed investor confidence near $180–$200

Alphabet’s Not Just Playing Catch-Up—It’s Playing a Smarter Game

On the surface, $Alphabet(GOOGL)$ might seem like the underdog. Its cloud business is smaller than AWS, with $12.3 billion in recent quarterly revenue, though it’s growing faster at 28%. But Google Cloud isn’t just scaling—it’s laser-focused on being the best place to run AI, full stop. Alphabet has something $Amazon.com(AMZN)$ doesn’t: custom silicon. Its Tensor Processing Units (TPUs) are purpose-built for AI workloads, giving it an edge in both cost and performance that many investors are underestimating.

Google Cloud also just nabbed OpenAI workloads. Yes, that OpenAI. When your competitor’s crown jewel finds reason to use your infrastructure, you’re probably doing something right.

But Alphabet’s AI strategy doesn’t stop at the cloud. Gemini, its flagship AI model, is rapidly being embedded across the Google universe—from Search to YouTube to Workspace. This dual strategy of monetising infrastructure while supercharging its core consumer platforms is quietly powerful. Alphabet isn’t just serving AI to others—it’s using it to future-proof its own dominance. And in a world where AI-native search threatens to displace traditional models, Alphabet’s willingness to cannibalise itself is a smart, if gutsy, play.

This self-disruption mindset is rare in large incumbents. Most firms defend legacy cash cows until it’s too late. Alphabet’s willingness to integrate Gemini into Search, even at the risk of short-term margin pressure, shows it understands that long-term survival in AI isn’t about protecting yesterday’s model—it’s about redefining it before someone else does. That cultural and strategic flexibility is an underappreciated advantage.

Valuation vs Vision: Which Stock Looks More Tasty?

Here’s where it gets interesting. Amazon, at $209 per share and a market cap of $2.23 trillion, is trading at a forward P/E of 32. Alphabet, at $166 per share with a $2.03 trillion valuation, is sitting at a much leaner forward P/E of 17.9. Alphabet also enjoys higher profitability—with a 30.9% net margin and a return on equity of 34.8%. That’s luxury-level financial performance for a company that’s still growing revenue at 12% year-on-year.

Alphabet’s capital efficiency is also noteworthy. Its debt-to-equity ratio is just 8.25%, compared to Amazon’s 51.6%. In short, it’s doing more with less, and doing it profitably. Add in a modest dividend and a PEG ratio of 1.28, and Alphabet begins to look like a rare blend of growth and value—a unicorn in today’s pricey tech jungle.

Despite recent volatility, Alphabet continues to hug the upper channel—a signal that its AI-fuelled strategy is quietly regaining market traction.

Gliding the upper band—Alphabet’s trend resilience remains quietly assertive

Amazon isn’t cheap, but it’s investing aggressively for dominance. The question is whether the returns on this vast AI infrastructure bet will arrive fast enough to keep valuation multiples in check. With its e-commerce margins still recovering and AWS doing the heavy lifting, Amazon is counting on scale to deliver long-term operating leverage. And to be fair, its five-year return of nearly 57% has handsomely rewarded patient shareholders.

Alphabet, meanwhile, has delivered a jaw-dropping 135% return over five years—even including this year’s modest pullback. That’s partly why the stock feels oddly unloved at these levels. Perhaps investors are too focused on the short-term existential fears around AI search, and not enough on Alphabet’s strategic reinvention.

Two giants. One future. Both shaping tomorrow’s AI landscape

Verdict: A Two-Horse Race With Room for Two Winners

If AI is the new electricity, $Amazon.com(AMZN)$ is building the grid and Alphabet is wiring the world to use it. These aren’t just big tech names; they’re foundational players in the next computing era. Amazon’s infrastructure dominance and bold spending make it the natural pick for those who want scale and endurance. $Alphabet(GOOGL)$ offers a more capital-efficient growth profile, strong AI-native consumer integration, and better value on nearly every metric.

I hold both, and I sleep well. But if I had to lean one way, Alphabet’s balance of innovation, valuation, and vertical integration makes it my preferred long-term AI compounder. The future’s bright—and oddly enough, it’s spelled with an A in both directions.

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