Title: Navigating 2025's Investment Landscape: Nvidia and Amazon Outperform the S&P 500 in 2024, but Which One is the Better Buy?
The iconic Dow Jones Industrial Average (^DJI 0.25%) has seen significant changes in the last five years, with key shifts in its 30-component lineup. Two major transformations happened in 2023 – Amazon (AMZN 0.01%) replaced Walgreens Boots Alliance, and Nvidia (NVDA -0.02%) took over from Intel in November. These newcomers have performed admirably, outperforming both the S&P 500 (^GSPC 0.16%) and the Dow indexes.
But investors are keen on a company's future, not its past successes. For 2025, Nvidia proves to be a standout choice over Amazon for several reasons.
Shared and Separate Successes
Before delving deeper, it's crucial to acknowledge that Amazon Web Services (AWS), a significant AWS customer, invests in Nvidia's latest tech. This includes the upcoming Blackwell architecture for advanced AI, possibly driving growth for both companies (or potentially slowing down Nvidia if AWS struggles).
A Superior Business Model
Amazon has built a versatile business, weathering economic hardships and branching into various end markets. Its network effects, strong cloud position, flourishing e-commerce sector, and diversified operations contribute to an compelling investment thesis.
However, AWS only contributes about 62% to Amazon's total operating income. Compared to last year, AWS saw an unexpected boost in revenue, but its expenses were also relatively modest. Conversely, Nvidia's data center business now dominates its revenues and operating income, boasting sky-high margins.
Nvidia's Hyperscaler Dominance
On Dec. 3, 2024, Nvidia shared its new breakthrough – the Blackwell architecture for AI, which will be available on AWS Marketplace Professional Offers. Businesses can utilize Nvidia's expertise in building AI models, further solidifying the synergy between the two companies.
Nvidia's unparalleled leadership in chips for hyperscalers and AWS's position as the premier hyperscaler give Nvidia an edge. According to Synergy Research Group, AWS leads the cloud market with a 31% share, compared to Microsoft's 20% and Google Cloud with 13%. However, AWS's cloud dominance isn't as powerful as Nvidia's grip on data center chips.
In Summary
Nvidia's focus on data centers, powerful client base, and high margins make it a more attractive buy for 2025. While both companies have their strengths, Nvidia's stronger business model, market position, and upside potential edge out Amazon in this analysis. Before investing, it's critical to strategically analyze individual long-term objectives and stay informed about both companies' developments.
In the realm of finance and investing, Nvidia's strong focus on data centers and its dominant position in the market for data center chips make it an appealing investment choice for 2025. This advantage is further bolstered by its high margins and a powerful client base.
Furthermore, Nvidia's partnership with Amazon Web Services (AWS) through the availability of its upcoming Blackwell architecture on AWS Marketplace Professional Offers, could potentially drive growth for both companies. This collaboration is a testament to Nvidia's strength in building AI models and its ability to leverage AWS's market leadership in the cloud sector.
