Are These 2 AI Stocks No-Brainer Buys This Month?

The narrative around artificial intelligence (AI) disruption is reaching a breaking point. Many software stocks are falling precipitously amid fears about the future of virtually every sector. We are getting to a point where rational analysis has been thrown out the window.

Even the two largest cloud companies in the world have seen their stocks fall from recent highs. Both Amazon (AMZN 1.85%) and Microsoft (MSFT +0.13%) stocks now trade down 20% or more, despite being the premier data center providers for the AI revolution.

Over the next few years, these two companies should see strong growth in their cloud divisions as they race to fulfill their massive backlogs. Does that make both Microsoft and Amazon no-brainer buys this month?

Image source: Getty Images.

Amazon’s huge spending plans

Amazon is planning to spend $200 billion on capital expenditures in 2026. This is going to flip free cash flow from positive to negative, spooking Wall Street.

The astute investor focused on the long term should see this as a bullish development. Amazon Web Services (AWS) is booked out with AI demand for years at its current capital spending rate, according to division leader Matt Garman. This means the company will be running at full throttle even as it spends $200 billion annually to build data centers.

Expand

NASDAQ: AMZN

Amazon

Today’s Change

(-1.85%) $-3.89

Current Price

$206.75

Key Data Points

Market Cap

$2.3T

Day’s Range

$206.47 - $211.04

52wk Range

$161.38 - $258.60

Volume

1.3M

Avg Vol

47M

Gross Margin

50.29%

AWS revenue grew 24% year over year last quarter and posted $129 billion in sales in 2025. If this same revenue growth can be maintained over the next three years, the AWS division alone will be generating close to $250 billion in revenue in 2028. This does not include the massive retail operation Amazon has built with its e-commerce platform, either.

Cash flow is going to be hit in the short run. However, over the long term, AWS will be a huge profit driver for Amazon.

A precarious AI relationship?

Microsoft was one of the first big movers in AI, establishing a tight relationship with start-up OpenAI, maker of ChatGPT.

Having ChatGPT as a customer and spending tens of billions of dollars on cloud computing has helped Microsoft Azure – its competitor to AWS – grow revenue by 39% year over year last quarter. This is faster than Amazon, but at a smaller revenue base (the exact figure for Azure revenue is not disclosed).

Expand

NASDAQ: MSFT

Microsoft

Today’s Change

(0.13%) $0.50

Current Price

$401.10

Key Data Points

Market Cap

$3.0T

Day’s Range

$398.75 - $407.47

52wk Range

$344.79 - $555.45

Volume

1.1M

Avg Vol

32M

Gross Margin

68.59%

Dividend Yield

0.87%

Investors are nervous about Microsoft’s own AI capex plans, which should number around $150 billion in 2026. It has a strong relationship with OpenAI, but the start-up itself is taking enormous risks by burning a ton of cash to try to gain market share. In the long term, if OpenAI runs into financial trouble, Microsoft Azure may take a revenue hit.

This is something to monitor, but it does not kill Microsoft’s overall business or potential in cloud computing. It has strong customer diversification and has been growing at a strong double-digit rate for more than a decade. The Intelligent Cloud division – which encompasses Azure, but also includes SQL Server, Windows Server, and security solutions – hit $32.9 billion in revenue last quarter. Productivity and business solutions, which include segments like the Microsoft 365 suite, hit $34.1 billion in revenue, up 16% year over year.

Data by YCharts.

Why these two stocks are no-brainer buys

Short-term concerns over AI spending and Microsoft’s relationship with OpenAI are being overstated in the company’s stock prices right now. These are diversified businesses with strong historical growth rates that are not reliant on one customer to succeed. As leaders in cloud computing, both stand to benefit tremendously from the AI revolution.

After taking these 20% haircuts, Microsoft and Amazon now trade at price-to-earnings ratios (P/Es) below 30 for the first time in many years. Microsoft has a P/E ratio of 24, while Amazon’s is 28.5. However, over the long term, Amazon might look cheaper due to its potential to expand profit margins.

What’s clear is that these are two fast-growing technology giants with significant competitive advantages and are now trading at reasonable prices. This makes them no-brainer buys for your portfolio today.