Oracle vs. Amazon: Which Is the Better AI Cloud Stock to Own for the Next 5 Years?

Oracle vs. Amazon: Which Is the Better AI Cloud Stock to Own for the Next 5 Years?

Will Healy, The Motley Fool

Sun, August 23, 2026 at 11:13 PM GMT+3 6 min read

When it comes to cloud stocks, Oracle (NYSE: ORCL) and Amazon (NASDAQ: AMZN) are among the industry's leaders.

Oracle's surging backlog initially lifted its stock, but the scope of its relationship with OpenAI cast doubt on the security of much of that future expected business. In contrast, Amazon pioneered and continues to lead the cloud industry, though it faces increasing competition from companies building AI-specific cloud environments.

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Fortunately, AI is likely here to stay, and Grand View Research forecasts a compound annual growth rate of 40.8% for the generative AI market through 2033. Also, both companies appear well-positioned to benefit from that growth over time.

However, one of these cloud stocks will likely benefit significantly more than the other over the next five years.

Oracle's current situation

Oracle came to the cloud infrastructure race at a relatively late date. Investors previously knew it best for its relational database technology. As that industry changed, Oracle shifted its focus to the cloud to reinvigorate growth, standing out by offering database-native AI supported by ultra-fast GPU networking. That has helped it offer high-performance compute and cloud networking at a lower cost than competitors such as Amazon Web Services (AWS).

This strategy culminated in a $300 billion partnership with OpenAI that it inked last fall. That deal dramatically increased its backlog, and the backlog has continued growing. After rising $85 billion in the most recent quarter, it now stands at $638 billion.

Nonetheless, OpenAI's multibillion-dollar losses and rising competition in the AI space have led industry analysts to question whether OpenAI will be able to fulfill its end of the deal. Additionally, Oracle has had to borrow heavily to add to its infrastructure so that it can monetize its backlog. That took its total debt level to $129.5 billion, up from $92.6 billion one year ago as it funded $55.7 billion in capital expenditures. Also, its free cash flow for its fiscal 2026 (which ended May 31) was negative $23.7 billion, a far greater outflow than its negative $394 million in free cash flow during its fiscal 2025.

Concerns about those figures may partially explain why the stock has fallen by 56% from its peak. That drop has brought its P/E ratio down to 25, which may entice some investors to buy. However, the stock is unlikely to recover until the company can reassure investors that its massive investments will pay off in the end.

The state of Amazon

As a more diverse enterprise, Amazon has some advantages, even as it faces some of the same issues that have investors concerned about Oracle. It benefits from a recession-resistant e-commerce business that supports some fast-growing enterprises like advertising and third-party seller services.

It also holds advantages as the company that pioneered cloud computing and drove its advancement. Thus, it offers a more complete set of tools and, unlike most of its competitors, has developed custom silicon specifically tailored to its cloud and AI infrastructure. Its $496 billion backlog, which is up from $364 billion in the prior quarter, shows that demand for its infrastructure remains high.

Still, much of Amazon's cloud infrastructure may be less well suited for AI workloads. Moreover, it has had financial struggles of its own with its build-out. Its long-term debt is now at $128.9 billion, up from $65.6 billion just six months ago. Additionally, it is planning to lay out $220 billion in capex in 2026 alone. As a result, a company known for a strong cash position has reported negative $7.6 billion in free cash flow over the trailing 12 months.

Admittedly, investors have been kind to Amazon -- its stock recently hit another new all-time high. Furthermore, its P/E ratio of 21 looks increasingly appealing considering that its earnings multiple routinely exceeded 50 (and often 100) just a few years ago. Nonetheless, given the company's rising debt load, the stock may not be immune to pain if the AI story does not pan out as planned.

Oracle or Amazon?

When contemplating how these companies are likely to perform over the next five years, it appears investors would probably be better off choosing Amazon.

Assuming the AI industry continues to grow as predicted and the companies derive worthwhile returns from their massive capex investments, both stocks should beat the market. Also, Oracle appears to have an edge with companies needing AI-ready infrastructure.

However, as the market leader in the cloud and e-commerce, Amazon has built a huge client base, making it less dependent on any single large client.

Moreover, if the AI story does not develop as well as expected, the diversity of Amazon's enterprise likely means it would recover faster. Since Amazon investors can buy into that diversity and safety at a slightly lower price-to-earnings ratio, it is likely to keep investors' money safer over the next five years without sacrificing the potential for returns.

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Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Oracle. The Motley Fool has a disclosure policy.

Oracle vs. Amazon: Which Is the Better AI Cloud Stock to Own for the Next 5 Years? was originally published by The Motley Fool