Amazon (AMZN +0.55%) is positioned for a potential breakout in 2026, driven by a resurgence in its cloud computing segment and strategic advancements in its chip business. After lagging in recent years, Amazon Web Services (AWS) reported a robust 28% revenue growth in Q1, marking its fastest pace in nearly four years. With significant capital expenditures planned to enhance capacity and partnerships with AI firms like OpenAI, AWS is set to sustain this momentum.

Additionally, Amazon’s chip business, now valued at a $20 billion annual run-rate, is gaining traction as demand for AI infrastructure surges. The company’s investments in custom chips and data centers are streamlining costs and positioning it favorably in the evolving AI landscape. Furthermore, Amazon’s e-commerce operations are benefiting from efficiency gains through AI and robotics, enhancing profitability.

With a forward P/E of 32, Amazon remains attractively valued compared to peers like Walmart and Costco, suggesting substantial room for growth and multiple expansion, making it a compelling candidate for investors seeking to outperform the S&P 500.

Source: fool.com