Why Nvidia's Growth Trajectory Matters More Than Amazon's Valuation Discount in 2026

The Diverging Paths of Two Dow Components

When Nvidia and Amazon joined the Dow Jones Industrial Average in 2024, few anticipated how differently they would perform in 2025. Nvidia surged 38.9% while Amazon barely moved with a 5.2% gain—making Amazon the laggard among all Magnificent Seven stocks. Yet this performance gap isn’t random; it reflects deeper structural differences in how these companies generate value.

Even after Nvidia’s impressive 2025 rally, the question for 2026 isn’t which stock is cheaper, but which offers superior growth and margin potential. The answer becomes clearer when you examine their core business engines.

Amazon’s Profitability Paradox: A Business Heavily Reliant on AWS

Amazon’s financial structure reveals a critical vulnerability. In its most recent quarter, the company posted just a 4.1% operating margin on its core retail operations—encompassing online stores, physical retail, advertising, subscriptions, and fulfillment services. This razor-thin margin exposes how competitive the e-commerce world remains.

The real profit engine is Amazon Web Services (AWS). Despite representing less than a fifth of total sales, AWS generated a staggering 60% of Amazon’s operating income over the nine-month period ending September 30, 2025, thanks to its impressive 35.6% operating margins. AWS functions as a high-margin cash cow, the undisputed crown jewel bankrolling Amazon’s broader ecosystem.

However, this dependency carries significant risk. AWS growth has been decelerating as Microsoft Azure and Google Cloud have captured increasing market share, while Oracle continues its competitive push. For Amazon to become a truly better investment for 2026, it needs either accelerating AWS growth—which faces headwinds—or major margin expansion in retail, which faces structural limitations.

Nvidia’s Multi-Front Expansion: Why Artificial Intelligence Extends Beyond Today’s Data Centers

Nvidia presents an entirely different growth story. Data center revenue accounts for approximately 90% of current sales, but unlike Amazon’s reliance on a single division, Nvidia is actively expanding its addressable market.

The company’s unveiling of its Rubin architecture at CES represents a watershed moment. This next-generation platform comprises six specialized chips engineered for the emerging wave of agentic AI, robotics, and autonomous vehicles. Rubin isn’t merely an incremental upgrade; it signals Nvidia’s evolution from a pure data center supplier to an infrastructure provider across multiple high-growth markets.

Crucially, Rubin deployments to major cloud providers—including AWS itself—are scheduled for the second half of 2026. The architecture extends beyond traditional GPUs, incorporating custom networking, interconnection protocols, and CPUs optimized for rack-scale deployment. This vertical integration approach allows Nvidia to command premium margins and lock in customer relationships.

The Valuation Question: Growth Premium vs. Value Discount

Amazon’s forward price-to-earnings multiple of 30.1 appears attractive compared to Nvidia’s 39. By traditional metrics, Amazon looks cheaper. Yet this comparison misses the fundamental issue: valuation multiples should reflect growth prospects and margin durability.

Nvidia’s higher multiple is justified by several factors. Its innovation cadence has prevented the law of large numbers from catching up—the company continues expanding earnings at exceptional rates while defending fortress-like margins. The Rubin roadmap suggests this pattern can continue as new markets activate.

Amazon, by contrast, faces a margin ceiling in its core e-commerce business. AWS margin expansion, while theoretically possible, must overcome intensifying competitive pressure. The company’s 2026 upside is more bounded than Nvidia’s.

Which Best Stock Positioning Matters More: Price or Trajectory?

For investors building portfolios of best stocks to invest in, the 2026 calculus favors growth catalysts over valuation discounts. Amazon has certainly become more attractive after underperforming relative to its earnings growth, and the stock deserves consideration for value-conscious investors.

Yet Nvidia’s structural advantages—diversifying revenue streams, accelerating architectural innovation, and expanding addressable markets through Rubin—suggest superior capital appreciation potential. If data center growth eventually moderates, Nvidia possesses multiple offset mechanisms through robotics, automotive, and enterprise AI applications. Amazon lacks comparable diversification.

The choice between these Magnificent Seven members ultimately reflects an investor’s philosophy: catching a more attractive valuation in a mature, slower-growth business, or riding an expanding growth narrative with premium execution and margins. For long-term wealth building through 2026 and beyond, the latter remains the more compelling opportunity.