Nvidia burst onto the scene in 2024 as a powerhouse in the semiconductor industry. It has quickly become the go-to provider of chips for AI data centers, which are in high demand. Thanks to this surge, Nvidia’s revenues and profits have skyrocketed, leading many investors to show strong interest in its stock. Currently, Nvidia boasts a market cap of $3.46 trillion, making it the largest company in the world by market value.
Looking ahead to 2025, I believe other tech giants will start to regain some ground as semiconductor supply chains catch up to the growing demand for AI products. My top pick for benefiting from this trend is Amazon, the world’s leading cloud computing company. Amazon’s cloud services play a crucial role in supporting many fast-growing AI tools.
With its strong e-commerce operations and robust cloud division, Amazon is poised to finish 2025 with the largest market cap globally. Here’s why.
Expanding Profit Margins
Unlike other major tech companies with already high profit margins, Amazon’s potential for growth remains significant due to its heavy investments for the future. Recently, we’ve seen Amazon easing off its spending, a trend I expect to continue into 2025.
In the last year, Amazon reported an operating margin of 9.8%, a record for the company. Part of this success stems from its Amazon Web Services (AWS), which boasts a much higher operating margin of 35%. Although AWS accounts for less than 20% of Amazon’s total sales, its strong margins are a key driver.
The real margin growth is coming from Amazon’s dominant North American e-commerce sector, which reported an operating margin of 5.9% over the past year. Given its numerous high-margin third-party fees, subscriptions, and advertising revenue, there’s ample room for profit margin improvement. By the end of 2025, I believe Amazon could see its profit margin rise to 15%, possibly even 20%, depending on how wisely it manages its investments.
A Boom in Artificial Intelligence
There’s a clear opportunity for Amazon to boost its profit margins further in 2025, especially with continued revenue growth at AWS. In the last quarter, AWS’s net sales growth jumped to 19%, a notable increase from 12% a year earlier. The demand for AI spending is likely to keep rising, which bodes well for AWS as companies increase their investments in AI. For example, Softbank has announced a $100 billion investment in AI technology in the U.S.
If AWS can grow its revenue by 30% over the next year due to heightened AI demand, it could reach $134 billion in sales, propelling Amazon’s overall revenue growth.
Why Amazon May Top the Market
My belief in Amazon’s ascent in 2025 is largely founded on its expected revenue growth at AWS and improving profit margins. Currently, Amazon’s trailing revenue is around $620 billion, showing an 11% annual growth rate in the last quarter. If this growth accelerates to 15%, Amazon’s revenue could soar to $713 billion. This showcases the vast markets Amazon continues to tap into across e-commerce, retail, and cloud computing.
The potential for Amazon’s operating margin to approach 20% in 2025 is promising. If Amazon halts its investments in research and development, it could even exceed that mark. That would translate to approximately $142.6 billion in operating income, surpassing the operating income generated by Nvidia, Apple, and Microsoft over the past year. If Amazon maintains this momentum, it could very well finish 2025 as the company with the highest market cap globally.
