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Amazon Just Proved It's No Longer an AI Underdog

May 02, 2026 — 08:46 am EDT

Written by

Keithen Drury for

The Motley Fool->

Key Points

- Amazon investors should be focused on AWS.

- This was Amazon's best growth quarter since 2021.

- These 10 stocks could mint the next wave of millionaires ›

Amazon (NASDAQ: AMZN) usually isn't the first company you think of when it comes to artificial intelligence (AI) stocks, but I think it should be. While most investors focus on Amazon's commerce and delivery business, its cloud computing service, Amazon Web Services (AWS), should be getting the attention of AI-focused investors.

Amazon just posted another incredible quarter, and AWS was a big driver of its strong results. What AWS is reporting should convince investors that it should be a top AI option, and not just the afterthought it seems to be for some. The segment is starting to catch fire, and investors should get some exposure to Amazon's stock to take advantage. Here's why.

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Image source: The Motley Fool.

Amazon's custom chip service is booming

At first glance, you may wonder what the big deal is about AWS, since it accounted for only 21% of Amazon's total sales in the first quarter. However, that's not the important metric here. AWS has a far better operating margin than its commerce counterpart, so revenue isn't the best metric for analyzing Amazon. Instead, investors should focus on the $14.6 billion in operating income AWS produced -- 59% of Amazon's total. AWS accounted for more than half of Amazon's total operating income, despite accounting for only a fifth of its total sales.

That makes AWS Amazon's most important division, and it just delivered 28% revenue growth in Q1 -- the fastest of any of Amazon's business segments. When your most profitable division is the fastest-growing, that bodes well for the state of the business.

Inside AWS, it's seeing massive demand for its custom AI chips, which are growing at a triple-digit year-over-year percentage. It also announced that several leading AI companies, including OpenAI and Anthropic, are using Amazon's Trainium chips, showcasing the prowess of these units. AWS is starting to dominate the AI space after falling a bit behind. As Amazon spends $200 billion on capital expenditures in 2026, it paves the way for in-demand computing capacity that will continue to make Amazon a ton of money at a high margin. This is a long-term investment play, and Amazon just showed investors that as long as you stay patient, its strategy will pay off.

With Amazon's overall revenue growth rate coming in at 17% year over year, it just wrapped up the best quarter since 2021, when it was coming down from a pandemic-era business acceleration.

Data by YCharts.

This is the best Amazon's business has looked in a long time, and it's mostly thanks to Amazon's AI strategy via AWS. This is a long-term investing theme, and makes the stock a solid buy-and-hold now.

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Keithen Drury has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.