AI-driven rally lifts markets as Alphabet, Nvidia, and Amazon lead gains

The market has been staging a major comeback since an Iran war ceasefire was announced last week. The S&P 500 has rebounded and is roughly flat year to date as of this writing, driven by lower oil prices and relief about what that means for the economy.

Artificial intelligence (AI) stocks make up a large portion of the weighted index, and higher stock prices in the space are supporting the recovery. Oil is used for multiple purposes and affects many industries; for AI, that shows up in the energy that powers data centers, in addition to how energy costs influence commerce and inflation.

Alphabet: turning AI into a search advantage

Alphabet, the parent company of Google, has positioned itself as an AI leader by using AI to strengthen its core search business. Google controls about 90% of search traffic, and when ChatGPT emerged about three years ago, it was seen as a threat to the traditional search engine model.

Alphabet has developed its own large language model, Gemini, which has reached 750 million monthly active users. The company also offers an AI mode within regular Google searches, and Google is now described as a fully AI-powered search engine.

Nvidia: investors refocus on continued AI spending

Nvidia has been a central AI beneficiary, but the market has recently been less impressed. Investors have expressed concern that hyperscalers may be overspending on AI and may not recoup their investments if spending slows.

Management has remained confident that spending will continue. CEO Jensen Huang assessed that there is a $1 trillion opportunity through 2027, and the article notes that sales growth has been accelerating. The market is increasingly receptive to the view that Nvidia still has a long growth runway.

Amazon: accelerating AWS growth and major AI investment plans

Amazon is described as the largest cloud provider in the world, accounting for about a third of the market. That scale gives it an edge in AI development, with the article stating that Amazon is making the biggest AI investments among hyperscalers.

Amazon expects to spend $200 billion in 2026 alone. CEO Andy Jassy is quoted as saying the company is monetizing capacity as fast as it can be installed.

AWS performance and AI-related momentum

Amazon Web Services (AWS) grew 24% year over year in the fourth quarter, the highest rate in 13 quarters. The article characterizes this as building on a base of $35.6 billion, implying a $142 billion run rate.

The article also states that the AI business is mostly on AWS, where Amazon offers AI development services to its growing cloud client base. It cites new and expanded deals in the fourth quarter involving Visa, Lyft, and the U.S. Air Force.

Chip business growth

In addition to AWS, Amazon has its own chip business that competes with Nvidia on price. The article says this segment is growing at triple digits, reaching a $10 billion run rate in the fourth quarter.

Amazon stock is described as rebounding with the broader market, with the article suggesting investors may have previously underestimated its long-term opportunity.