Seven Is a Crowd…

Seven companies. Trillions of dollars in market value. And an enormous amount of money riding on the future of artificial intelligence.

The Magnificent Seven have dominated the technology conversation for years.

Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla have each built businesses that changed their respective industries.

And lately, they’ve been pouring billions into what could become the next major source of growth.

→ Artificial intelligence.

But investing in AI involves a rather interesting question.

Who stands to benefit most as the technology moves beyond the initial rush to build the infrastructure?

After all, the companies supplying AI chips have already attracted enormous attention.

The next phase could look quite different.

And the economics behind it reveal why these two companies deserve a closer look.

… some of the numbers are particularly interesting.

Let’s dig in.⇩

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The Magnificent Two.

Building an AI empire is becoming a rather expensive undertaking.

The chips cost billions. → The data centers cost billions more. → And keeping all that computing power running isn’t exactly cheap.

For most companies, that’s a formidable bill.

For Alphabet GOOG ( ▲ 0.97% ) and Amazon AMZN ( ▲ 4.98% ) , the advantage is having deep pockets — and businesses that keep filling them.

Both generate substantial cash to help fund their increasingly expensive AI ambitions.

And both have another business in common: cloud computing.

And judging by the latest figures, neither giant is having much trouble finding customers.

→ Google Cloud: Revenue grew 82% year over year.

→ Amazon Web Services (AWS): Revenue grew 37%.

Not bad for businesses already operating at an enormous scale.

But the similarities don’t end there.

Both companies are also developing their own AI chips, potentially reducing their dependence on outside suppliers and giving them greater control over costs.

Of course, building your own technology comes with a rather substantial price tag.

✱ The question is whether all that spending will eventually pay off.

And the cloud numbers offer an interesting place to start. ↓

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Cloudy With a Chance of Billions…

Apparently, even the cloud has a growth leaderboard.

And right now, Google is sitting rather comfortably at the top.

According to figures cited in Monday’s reporting, the three major cloud platforms posted some impressive numbers:

→ Google Cloud: +82% revenue growth.
→ Microsoft Azure: +43% growth.
→ Amazon Web Services (AWS): +37% growth.

All three are growing rapidly. But Alphabet’s cloud business is moving at a particularly impressive pace.

In Q2 2026, Google Cloud generated $24.77 billion in revenue, compared with $13.62 billion a year earlier.

That’s roughly +$11.15 billion in additional quarterly revenue.

And it wasn’t a one-quarter surprise.

Google Cloud’s reported growth rate has climbed from 34% a year earlier, to 48% two quarters before the latest report, and now 82%.

!!! Quite the acceleration.

But faster growth doesn’t necessarily mean a bigger business.

AWS remains the larger cloud provider, while the companies’ reported growth rates aren’t perfectly comparable.

→ And for Alphabet, that explosive growth comes with an equally impressive spending bill.

The company is investing heavily in data centers, computing equipment, and the infrastructure needed to keep up with AI demand.

Which brings us to another interesting detail.

Google and Amazon aren’t content with renting out the computing power. They’re increasingly designing the chips behind it, too.

And that could change the economics of the whole operation. ↓

Thanks, Nvidia. We’ll Take It From Here.

Buying the latest AI chips is expensive.

Making your own? Also expensive.

But Alphabet and Amazon are betting that the second option could save them a considerable amount of money in the long run.

Both companies are developing custom chips designed for the enormous computing demands of artificial intelligence.

→ Alphabet: Its Tensor Processing Units (TPUs) are specialized chips designed to handle AI workloads.
→ Amazon: AWS has developed its own Trainium and Inferentia chips for training AI models and running them.

Rather than relying entirely on outside suppliers like Nvidia, both companies can design hardware around the specific needs of their cloud businesses.

And according to the figures cited in Monday’s reporting, the economics could be rather attractive.

→ Amazon: Reported infrastructure payback periods of 2-3 years.
→ Alphabet: Around 2 years.
→ Alphabet using its own TPUs: Potentially just 1 year.

Payback period simply measures how long it takes for an investment to earn back its initial cost.

The figures aren’t independently verified, but the potential advantage is clear.

Still, the logic is compelling.

When you’re spending billions, getting your money back a year earlier is a pretty useful trick.

And fortunately for Google and Amazon, they have other businesses helping foot the bill.

Let’s follow the money. ↓

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A Little Help.

And the cash machines funding those AI ambitions? Alphabet and Amazon have owned them for years.

Google has its advertising empire. Amazon has its e-commerce empire.

Both are now finding new ways to put AI to work inside businesses they already know remarkably well.

For Alphabet GOOG ( ▲ 0.97% ) , that starts with Search.

And despite concerns that AI could disrupt traditional search, the advertising engine is still growing.

→ Google Search revenue: $63.27 billion in Q2 2026, up 17% year over year.

Amazon AMZN ( ▲ 4.98% ) , meanwhile, has a rather different playground.

Its sprawling e-commerce operation offers opportunities to use AI across shopping, logistics, and warehouse automation.

Of course, having a cash machine doesn’t mean the money is unlimited.

And Alphabet’s latest financial results offer a rather revealing look at what happens when AI ambitions meet the accounting department.

Let’s check the receipt. ↓

Money In. More Money Out.

Alphabet’s cloud business is growing rapidly, but its advertising engine is still humming.

So where’s all that money going?

Quite a lot of it is heading straight back into AI infrastructure.

And the latest quarterly figures make for an interesting receipt.

→ Operating cash flow: $39.07 billion generated in Q2 2026.

→ Capital expenditures: $44.9 billion spent on long-term investments, including data centers and equipment.

→ Free cash flow: – $5.86 billion.

Free cash flow is the money left after a company pays for its capital investments. In Alphabet’s case, spending exceeded operating cash generation during the quarter.

And it highlights the challenge facing both Alphabet and Amazon.

Of course, one quarter of negative free cash flow doesn’t mean Alphabet’s business has stopped generating money. It means its investment bill temporarily exceeded the cash coming in.

The question is how much of that spending eventually turns into profit. ↓

The Price of Great Expectations.

Here is another number that needs to be considered besides AI spending: how much investors are paying for the profits these companies are expected to earn.

And according to the figures cited in Monday’s reporting, Alphabet trades at roughly 23 times forward earnings.

→ Forward price-to-earnings (P/E) compares a company’s stock price with its expected profits over the next 12 months.

✱ A higher multiple generally means investors are paying more for each dollar of anticipated earnings.

1 For Alphabet, that valuation comes alongside some impressive growth.

→ Google Cloud revenue: Up 82% year over year.

→ Google Search revenue: Up 17%.

→ Alphabet operating income: Up 30.4%.

Not exactly the numbers you’d expect from a business running out of room to grow.

2 Amazon presents a slightly different equation.

Its investment case rests partly on the potential for AWS, custom AI chips, and efficiency improvements across its retail empire to generate greater profits over time.

The AI race certainly has no shortage of ambitious spending plans.

Now comes the interesting part: making all those billions pay off. 

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