The U.S. is home to eight technology companies with a market capitalization of $1 trillion or more, but only three have graduated into the ultra-exclusive $3 trillion club:
Apple: $3.6 trillion
Nvidia: $3.4 trillion
Microsoft: $3 trillion
I predict Amazon(NASDAQ: AMZN) will join them within the next two years. It has a market cap of $2.4 trillion as of this writing, but that figure could be poised for significant upside thanks to the company's explosive earnings growth and its leadership in artificial intelligence (AI).
Here's how Amazon can chart a path to the $3 trillion club by the end of 2026.
Amazon Web Services is a profit-generating powerhouse
Amazon is typically known as the world's largest e-commerce company, but it also leads the cloud computing industry through its Amazon Web Services (AWS) platform. AWS provides hundreds of services to help businesses transition into the digital age, but it has also become the center of Amazon's growing portfolio of AI projects.
Management believes every digital application we use in daily life will eventually be infused with AI. AWS wants to be the go-to provider that businesses use to deliver those services, which will involve dominating the three core layers of AI.
Hardware is the bottom layer. AWS operates AI data center infrastructure powered by Nvidia's industry-leading graphics processing units (GPUs), but it also designed its own chips. That includes a new variant called Trainium2, which can save developers up to 40% on training costs compared to GPUs from suppliers like Nvidia.
Large language models (LLMs) make up the middle layer. The AWS Bedrock platform offers developers access to over 100 ready-made LLMs from third parties like Anthropic and even DeepSeek, helping them accelerate their AI projects. AWS also built a family of models in-house called Nova, which can reduce development costs by up to 75% compared to other LLMs on Bedrock, and major customers like Palantir Technologies are already using them.
Software is the third and final layer. Amazon embedded an AI-powered virtual assistant into AWS called Q, which can help businesses identify trends in their data, write computer code for software projects, and perform other tasks. Amazon used Q internally late last year for a project that saved the company $260 million and an estimated 4,500 developer years, according to CEO Andy Jassy on the fourth-quarter earnings call. Q's capabilities will expand over time, creating new revenue streams for AWS.
AWS generated $107.5 billion in revenue during 2024. Even though that represented just 16.8% of Amazon's total revenue of $637.9 billion, it accounted for 58% of the company's total $68.6 billion in operating income. In other words, the cloud platform is the profitability engine behind Amazon's empire.
Image source: Amazon.
AI is also driving efficiency in its e-commerce business
Although AWS is the core focus for Wall Street analysts and investors, e-commerce remains Amazon's largest business unit by revenue. It typically operates on razor-thin profit margins because the company aims to provide consumers with ultra-low prices, but it's finding new ways to unlock efficiency, including through the use of AI.
The company transformed its logistics network in 2023 by breaking the U.S. market into eight distinct regions. It allows the company to store different products in different fulfillment centers depending on their popularity in a given region, so they travel shorter distances to reach consumers, thus reducing costs. AI has played a key role in this transition by improving forecasting by 10% and increasing the accuracy of regional predictions by 20%, management says.
Overall, the company said it reduced its cost-to-serve globally during 2024 for the second year running, with further improvements to come.
The use of AI in e-commerce also extends to the shopping experience. The company developed an AI assistant called Rufus, which can help customers compare products to make the most-informed decisions. Then there is Amazon Lens, a tool that uses AI and computer vision to find products based on photos a shopper has taken in the real world.
Management also said that it built a generative AI application for its third-party sellers that can fill in important details when they are creating a new product page. Not only does this speed up the process, but it also ensures they are including crucial details that help their products rank highly in the website's search results.
The path to the $3 trillion club
The improved efficiencies in Amazon's e-commerce segment, combined with the strong year for AWS, helped the company generate a record $5.53 in earnings per share (EPS) during 2024, a 90% increase from the previous year.
That places Amazon stock at a price-to-earnings ratio (P/E) of 40.9. It's still a premium to the Nasdaq-100 index, which represents all of Amazon's big-tech peers and trades at a P/E of 33.8. However, the picture looks a little different when we consider the company's potential.
Wall Street's consensus forecast (provided by Yahoo!) suggests Amazon could generate $7.60 in EPS during 2026, which places its stock at a forward P/E of just 29.9:
In other words, Amazon stock would have to rise by 36.7% over the next two years just to maintain its current P/E of 41.3, which would place the company's market cap at $3.3 trillion. Of course, this scenario hinges on Amazon meeting Wall Street's expectations.
I think that is extremely likely, considering Amazon actually beat the Street's EPS estimates by an average of 22.6% over the last four quarters. And Jassy believes the AI business within AWS could have grown even faster in 2024 if not for capacity constraints, meaning it simply didn't have enough data centers to meet demand from developers.
He believes those constraints will ease in the second half of 2025, paving the way for AWS to potentially deliver accelerated revenue growth. Since it's the profit engine behind Amazon, that should also lead to much better earnings. If the company continues to exceed EPS expectations in 2025 and 2026, it could reach the $3 trillion club with an even lower P/E.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool 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.
