All eyes have been on tech companies since the artificial intelligence (AI) boom began last year.
Big tech companies like Amazon (NASDAQ: AMZN) have attracted investors, with the stock up 69% in the last twelve months. The retail giant has gained support by delivering solid growth in its e-commerce segment and investing heavily in the nascent AI market. Amazon is on a promising growth path that could thrive in the long term.
However, it may be worth investing in a company that is at an earlier stage in its AI venture (with potentially more headroom) and has a history of outperforming Amazon stock.
Amazon has made many millionaires over the years, with its stock price almost doubling since 2019. However, the above graph shows Apple‘S (NASDAQ: AAPL) Its stock prices have risen almost three times as much as Amazon’s over the same period.
Apple has taken a slower approach to AI than Amazon since early 2023, but recent developments suggest that Apple is gearing up to make a big splash in the sector this year.
So forget Amazon. Apple has made many more millionaires and will make more.
An edge in the AI ​​consumer market
Apple has achieved almost unparalleled brand loyalty among its customers over the years. Consumer preference for its products was best conveyed by Warren Buffett last year when he said, “If someone offered you $10,000 to never buy another iPhone again, you wouldn’t take it.” While surprising, this sentiment rings true for millions of consumers who would rather give up many other brands before straying from Apple.
The company has strategically created an interconnected ecosystem for its devices that discourages users from switching to competing products. Advanced connectivity and Apple-exclusive apps like Messages and FaceTime have become an integral part of many people’s workflows, keeping them within the company’s ecosystem even when it’s time to upgrade.
Apple has achieved leading market shares in many of its product categories, including smartphones, tablets, smartwatches and headphones. Meanwhile, the wide use of its products allowed the company to rapidly expand in digital products, with the services segment becoming the second-highest earning division (only behind the iPhone).
Quarterly services revenue has grown 36% over the past three years, significantly higher than the iPhone’s 16% growth.
It’s no secret that Amazon also has a huge user base, with its shopping site available in around 20 countries. Meanwhile, it is home to the world’s largest cloud platform, Amazon Web Services (AWS), where it is rapidly expanding its AI offering to businesses. However, Apple could arguably do better in the consumer AI space in the long run by leveraging the popularity of its products.
The iPhone maker’s devices could become a major growth driver in the public’s adoption of AI, evidenced by the success Apple has already had in promoting its digital services. On May 7, Apple held its “Let Loose” event, where it debuted its latest iPad Pro. The tablet is the first device equipped with Apple’s M4 chip, the most powerful chip to date.
The M4 significantly expands Apple’s AI capabilities and is a promising look at the company’s future in AI. Apple will hold its Worldwide Developer Conference in June, where it is expected to build on its recent event by unveiling a range of new AI-powered features. Meanwhile, Bloomberg reported in April that the company plans to overhaul its Mac lineup to focus on AI offerings.
Apple is a much better value than Amazon
Amazon has managed to win over many investors this year. However, while the rally has benefited current investors, it has also raised the price of entry for new investors. Meanwhile, recent hurdles have kept Apple shares at a more attractive price point.
This chart shows that Apple has a significantly lower price-to-earnings (P/E) ratio and a lower price-to-free cash flow ratio. These are useful statistics in determining the value of a stock because they take into account the company’s financial position. For both, the lower the number, the better the value. And Apple is winning on both fronts.
Furthermore, Apple’s free cash flow of $101 billion is much higher than Amazon’s of $46 billion, suggesting that Apple could be better equipped to invest in its business and overcome potential headwinds.
In addition to huge brand loyalty and a growing position in AI, Apple stock is a no-brainer that can make you a millionaire with the right investment.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has and recommends positions in Amazon and Apple. The Motley Fool has a disclosure policy.
Forget Amazon: This Stock Made Many More Millionaires was originally published by The Motley Fool
