1 Striking Reason This Trillion-Dollar Cloud Pioneer Is a Better Artificial Intelligence (AI) Buy Than Apple Right Now

Apple (NASDAQ: AAPL) has been a surprisingly strong stock pick over the past year. It has risen nearly 50%, outperforming many other AI-centric stocks, despite not going all-in on AI like some of its peers. But some of its stock strength may have come from this decision not to go all-in on AI. However, I don't think it's a great stock to continue investing in as several others can easily outperform Apple over the next five years, especially as more computing power comes online.

One of the best cloud stocks to buy right now is Amazon (NASDAQ: AMZN), and I think it offers a more compelling investment case than Apple. Amazon is only up 12% over the past year compared to Apple's 47%, and it could catch up quickly.

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AWS is at the start of a major growth cycle

Amazon Web Services (AWS) is Amazon's cloud computing platform, and it's the primary reason to own the stock, not the commerce business. AWS accounted for 59% of Amazon's operating profit in Q1, driving the company's overall profitability. It's also the fastest-growing segment at Amazon.

Demand for cloud computing capacity, specifically AI computing power, is reaching new highs, and Amazon is spending a jaw-dropping $200 billion on capital expenditures this year to meet demand. As this investment brings more computing power online, AWS will be primed for a revenue spike, since Amazon wouldn't be spending so much if there weren't a major return on investment ahead.

Right now, AWS is growing at a 28% clip -- the best mark in nearly four years. That mark will likely accelerate over the next few years as more capacity comes online, easily allowing it to outgrow Apple. This will allow Amazon's stock to outperform Apple's, but there's also another striking reason why Apple isn't as good a buy as Amazon: valuation.

Apple's valuation has frankly gotten out of control. The best way to evaluate a company during a heavy capital expenditure cycle is to use operating cash flow. This strips out one-time costs from capital expenditures as well as other factors like investment gains. From this standpoint, Apple is priced at nearly double Amazon's level.

AAPL Price to CFO Per Share (TTM) data by YCharts

It wasn't always this way, and Amazon is trading at the lower end of its historical range while Apple is trading at the higher end. Furthermore, Apple may be seeing some margin creep as prices for memory and storage have skyrocketed due to AI demand eating up the global supply. If Apple has to raise prices to boost margins, it could backfire, as consumers are already stretched thin and may not be able to afford the increase.

I think all of this adds up to make Amazon a better investment than Apple, and I'm confident it will easily outperform Apple over the next five years.

Keithen Drury has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Apple. The Motley Fool has a disclosure policy.