Here's the Best "Magnificent Seven" Stock to Buy Right Now, According to Wall Street (Hint: Not Nvidia)

The Magnificent Seven stocks are listed alphabetically below. Beside each is the median price target among Wall Street analysts, along with the implied upside from the current share price.

• Alphabet: $195 per share (15% upside)
• Amazon: $220 per share (18% upside)
• Apple: $200 per share (10% upside)
• Meta Platforms: $525 per share (11% upside)
• Microsoft: $475 per share (15% upside)
• Nvidia: $1,000 per share (11% upside)
• Tesla: $179.10 per share (3% upside)

Wall Street analysts see every Magnificent Seven company as undervalued to some degree, but none more so than Amazon, a red-hot artificial intelligence stock that rocketed 77% over the past year. Here's what investors should know.

Amazon reported strong results in the first quarter

Amazon beat expectations with its first-quarter financial report. Revenue increased 13% to $143.3 billion as advertising and cloud services sales growth accelerated versus the prior year. Operating margin expanded 700 basis points (7 percentage points), due in part to efficiency gains from the regionalization of its fulfillment network, and GAAP net income tripled to reach $0.98 per diluted share.

The chart below provides detail on revenue growth across Amazon's primary business segments.

The chart shows Amazon's first-quarter revenue growth across its seven primary business segments.

Amazon has three important growth engines

The bull case for Amazon centers on its strong presence in e-commerce, digital advertising, and cloud computing. To quantify those opportunities, Straits Research forecasts that online retail sales will increase at 8% annually through 2030. Grand View Research expects digital advertising and cloud computing sales to compound at annual rates 15% and 14%, respectively, during the same period.

In e-commerce, Amazon operates the largest online marketplace in North America and Western Europe as measured by sales. Moreover, the company is still gaining market share, even in the United States, where it's expected to account for more than 40% on online retail sales this year. Analysts at Morgan Stanley believe Amazon could surpass Alibaba as the largest e-commerce company worldwide by 2027.

Amazon has used its momentum in retail to build a booming digital advertising business. The company will account for three-quarters of retail ad spending in the U.S. this year, more than 10 times its closest competitor Walmart. Globally, Amazon is the third-largest digital advertiser, and its market share is forecasted to climb 180 basis points over the next two years as the company leans into new opportunities on Prime Video.

Finally, Amazon Web Services (AWS) is the largest provider of cloud infrastructure and platform services. Argus analyst Jim Kelleher sees that as a major advantage where artificial intelligence (AI) is concerned. "As the leading provider of infrastructure-as-a-service and other cloud services, AWS is uniquely positioned in the burgeoning AI-as-a-service market," he wrote in a recent note to clients.

Admittedly, AWS lost 1 percentage point of market share over the last year, while Microsoft Azure gained 2 percentage points of market share, due in part to demand for AI services arising from its partnership with OpenAI. But AWS has partnered with another AI start-up in Anthropic, and the company is leaning into demand for generative AI solutions by investing in product development at every layer of the technology stack.

At the infrastructure layer, AWS is designing custom AI chips for training and inference that cost less than Nvidia GPUs. At the model-tuning layer, AWS launched a generative AI development service Amazon Bedrock, and it just added Anthropic's Claude 3 Opus to the platform, a large language model that outperforms OpenAI's GPT-4. Finally, at the application layer, AWS recently introduced Amazon Q, a conversational copilot that can summarize data, answer questions, and automate tasks like coding.

Here's how CEO Andy Jassy pitched Amazon Q on the first-quarter earnings call:

"Q is not only the most functionally capable AI-powered assistant for software development and data, but also setting the standard for performance. Q has the highest-known score and acceptance rate for code suggestions, outperforms all other publicly benchmarkable competitors at catching security vulnerabilities, and leads all software development assistants at connecting multiple steps together and applying automatic actions."

Amazon's investments in AI product development -- from custom chips to Bedrock to Amazon Q -- could accelerate cloud services sales growth, perhaps to the point where the company regains the market share it lost in recent quarters. Regardless, AWS should be a major beneficiary as the AI boom unfolds.

Why Amazon stock is a worthwhile long-term investment

Going forward, Amazon can achieve low-double-digit sales growth through the end of the decade if it merely keeps pace with the e-commerce, digital advertising, and cloud computing markets. Indeed, Wall Street expects the company to grow sales at 11.1% annually through 2026 and 10.9% annually over the next five years. But those consensus estimates leave room for upside if AWS becomes the go-to cloud provider for AI workloads.

In that context, its current valuation of 3.3 times sales is relatively reasonable, despite being a premium to the three-year average of 2.9 times sales. I think Amazon has a good shot at beating market over the next three to five years, and its odds would improve if the AI boom leads to a material acceleration in cloud services sales growth. Patient investors should consider buying a small position in Amazon stock today.

Should you invest $1,000 in Amazon right now?

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions in Amazon, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Tesla, and Walmart. The Motley Fool recommends Alibaba Group and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.