Best Stock to Buy Right Now: Alibaba vs. Amazon

For instance, both expanded beyond their e-commerce roots to become giants in the cloud computing space

Alibaba is the world's fourth largest cloud vider by market, while Amazon is the global leader

Now, the pair are moving into the artificial intelligence (AI) arena

Both leveraged their cloud infrastructures to develop sophisticated AI capabilities that they sell to other es

Alibaba and Amazon stand to see price appreciation, thanks to the growth of the AI industry

But is one a better investment for the long haul

Here's a look at both companies to arrive at an answer

Image source: Getty Images

Part of its price boost comes from its success in the AI space

In February, the company closed a deal with Apple to vide AI to iPhones sold in China

These kinds of wins pelled Alibaba's AI revenue to triple-digit year-over-year growth for seven straight quarters through its fiscal fourth quarter, which March 31

CEO Eddie Wu stated: "Looking ahead, we will remain focused on our core es and continue to drive AI + Cloud as a new engine for our long-term growth. " To that end, Alibaba's fiscal 2025 free cash flow (FCF) was down 53% year over year to $10. 2 billion as the company invested heavily in infrastructure imvements to power its artificial intelligence systems

However, Wall Street may be underestimating Amazon's long-term potential

Alibaba, Amazon views in AI as a imperative. "That's why there are more than 1,000 GenAI applications being built across Amazon," stated CEO Andy Jassy

Among the areas receiving this AI infusion is Zoox, Amazon's venture

Zoox is a driverless ride-hailing fleet controlled by AI, which is set to roll out this year

Choosing between Alibaba and Amazon stock Because Alibaba and Amazon have pursued similar paths to success, and both are doing well, choosing which to invest in can be challenging

One consideration is price valuation, which can be assessed through the price-to-earnings (P/E) ratio

The chart shows that Amazon's P/E ratio is lower than it was a year ago, meaning its stock is now a better value, but it's still more than double Alibaba's

This indicates that Alibaba s possess a superior valuation

Indeed, Alibaba stock looks attractively priced, since its P/E multiple is also lower than it was a year ago

However, because both companies are pursuing dominance in the AI field, geo becomes a factor to weigh as well

Government sees China as a threat in the AI era, so it's scrutinizing the Alibaba partnership with Apple

In addition, earlier this year, the Trump administration called for the delisting of Chinese stocks

Government isn't Alibaba's only concern

The company admits that the Chinese government has "significant oversight and discretion over the conduct of our. " Alibaba went on to explain that the Chinese "legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all. " This means that Alibaba might not know it's violating a policy until the government steps in

Chinese regulations could hurt its to the point where its stock price "could significantly decline or become worthless," according to the company

Amazon isn't free from the effect of Chinese regulations, since China-based sellers and suppliers contribute to the company's revenue

That said, it faces lower risk from the feud between the U

After all, the Trump administration is not demanding Amazon's delisting

Although Alibaba stock looks reasonably priced, Amazon's lower risk from the U. -China tensions gives it the edge as the better long-term investment

The drop in its P/E ratio in recent months makes now a good time to pick up s

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors

Robert Izquierdo has positions in Alibaba Group, Amazon, and Apple

The Motley Fool has positions in and recommends Amazon and Apple

The Motley Fool recommends Alibaba Group

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