AMZN has strong long-term potential driven by rapid AWS growth ($496B backlog) and advertising, but high capex poses a risk to free cash flow returns.

Today , I will talk about AMD, Broadcom, Amazon, Meta, and Nvidia. Amazon, Microsoft, Google and Meta are spending billions to build data centers, buy chips and secure electricity.

Let's move on to the next arrow, Amazon. Amazon is interesting because people tend to think of it as an online shopping company , but I think you should look at Amazon as several different companies actually operating under one roof.

You have e-commerce, third-party vendor services, subscriptions, and advertising. I really like advertising , but I found it difficult. But advertising is literally Amazon's secret weapon. As well as Amazon Web Services.

Amazon Web Services is particularly important to the thesis of investing in artificial intelligence. In the second quarter of 2026, Amazon Web Services generated revenue of approximately $42.2 billion, representing a year-over-year growth of approximately 37% .

This is an annual revenue rate of approximately $169 billion. This is what we're talking about when it comes to a cloud business that's growing at a rate that many smaller companies would find truly difficult to achieve, yet Amazon is a huge company, isn't it?

One of the seven giants, a huge business, yet it is growing very rapidly .

Why isn't the stock growing? I see a complete contradiction here, and I love Amazon as an investor. Companies need computing power to train AI models , run AI agents , store data, and deploy new applications.

Most companies do not want to spend billions to build their own data centers. Therefore, it could instead rent that infrastructure from Amazon Web Services ( AWS). The more AI applications it deploys, the more computing resources it will need.

But here's something else that's extremely important. Amazon is not only buying chips from other companies , but is also developing its own artificial intelligence chips, including "Trainium," to improve performance and reduce the cost of providing AI computing.

AWS can benefit from the demand for computing infrastructure and the economics of its own chip designs simultaneously. This economic aspect is really important, because cost savings mean greater free cash flow.

Amazon recently announced that its backlog of orders with AWS is approximately $496 billion. This is a substantial amount of future contractual work , although the timing of its conversion into revenue depends on customer deployments.

Then there are the advertisements, which are my favorite part of this business. Amazon has a huge advantage because people who visit its website often have a pre-existing intention to buy.

Basically, they want to buy something. This is extremely valuable information for advertisers.

A company that sells a chair doesn't necessarily want to advertise to someone who is simply browsing social media. Rather, you want to reach someone who is actively looking to buy the chair and is willing to pay money for it.

Therefore, Amazon can profit from that shopping intent through promoted listings and other advertising products.

However , AI-powered shopping agents may disrupt this activity. If customers begin to rely more on AI assistants to find products and complete purchases, Amazon will need to adapt its method of generating advertising revenue.

Right now, my biggest concern about Amazon is its capital expenditures. Building an AI infrastructure requires huge sums of money, and by that I mean enormous sums that could fill wheelbarrows and entire buildings with cash.

This can put a lot of pressure on, as you guessed, free cash flow .

So, the crucial question is whether AWS's revenue and operating profits will ultimately grow at a faster pace than the spending required to build that infrastructure. This is what I am monitoring closely.

Amazon has multiple potential growth engines, but investors still need to see attractive returns on invested capital.

My five stocks: AMD, Broadcom, Amazon, Meta, and Nvidia. All five companies are in a position to leverage artificial intelligence in different ways, and I believe they have great long-term potential.

I will continue to buy when attractive opportunities arise .