Tech stocks have been slammed in 2026, with recent trading days compounding the pain for investors. Even industry leaders like Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) and Amazon (NASDAQ: AMZN) have seen their shares take a hit. As of this writing, the two stocks are both down about 13% year to date.
With both tech companies investing aggressively in artificial intelligence (AI) infrastructure, the recent sell-off makes them look like tempting opportunities. But which of these two tech heavyweights is the better place to deploy capital right now?
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Let’s look at the underlying business fundamentals to find out.
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Amazon is firing on all cylinders, particularly in cloud computing.
In the fourth quarter of 2025, the e-commerce giant reported a 14% year-over-year increase in net sales to $213.4 billion.
But its cloud computing business, Amazon Web Services, is seeing meaningfully faster growth than its consolidated business. This crucial segment generated $35.6 billion in revenue during the period, representing a 24% year-over-year growth rate. That is a notable acceleration from the 20% growth Amazon Web Services reported in the third quarter of 2025. Management specifically pointed to customer demand for AI workloads as a major driver of this momentum.
But achieving growth like this requires significant investment. Amazon expects to outlay approximately $200 billion in capital expenditures in 2026. While the company anticipates strong long-term returns on this capital, spending at that scale leaves little room for execution missteps.
Alphabet’s recent performance is arguably even more impressive. The search giant posted consolidated revenue of $113.8 billion for the fourth quarter of 2025 — up 18% from the year-ago period.
Like Amazon, Alphabet is seeing outsize benefits from the artificial intelligence boom — but even more so. Its Google Cloud business saw revenue jump an incredible 48% year over year to $17.7 billion in the fourth quarter. This cloud computing segment is now operating at an annual run rate exceeding $70 billion.
And Alphabet’s core Google Services business remains highly lucrative, with search and other revenue growing 17% year over year in Q4.
Also similar to Amazon, Alphabet is forecasting substantial spending this year. The company anticipates its 2026 capital expenditures will land between $175 billion and $185 billion as it builds out capacity to meet surging customer demand.
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Both companies are spending huge sums of money to capture the AI opportunity, but Alphabet seems to be getting a more immediate payoff in its cloud division.
When comparing the two, Alphabet’s 48% cloud growth rate handily beats Amazon’s 24% pace. Further, AI seems more complementary to Alphabet’s entire ecosystem, enhancing everything from search results to YouTube recommendations in a material way.
Indeed, Alphabet CEO Sundar Pichai noted in the company’s fourth-quarter update that AI is driving “an expansionary moment” in its core search business.
Then there is the valuation.
Alphabet trades at a price-to-earnings ratio of about 25. Amazon, meanwhile, carries a slightly higher price-to-earnings ratio of around 28.
Choosing between these two tech giants is tough, as they both look attractive after their recent pullback. But if I had to choose one, I believe Alphabet is the better buy today. The search company offers both much faster cloud growth and a slightly cheaper valuation, giving investors a better setup for the long haul.
Of course, there are risks with both stocks. For instance, if the payoff from their respective infrastructure build-outs takes longer than anticipated, both companies could see their profit margins pressured. Still, given its exceptional cloud momentum and lower valuation multiple, I think Alphabet is a compelling investment here.
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Amazon. The Motley Fool has a disclosure policy.
Alphabet vs. Amazon: Both AI Stocks Have Been Hammered, but One Looks Like a Better Buy Now was originally published by The Motley Fool