In 2024, contrarian investor Matt McIlwain of Madrona Venture Group made a bold prediction: Microsoft and Amazon, with their long-term AI strategies, would outperform Apple. A year later, in 2025, this prediction has been validated.

Microsoft and Amazon's Ascent

Microsoft's stock has risen 15%, and Amazon's has increased by 25% year-to-date. Microsoft's revenue for the twelve months ending March 31, 2025, was $270.010B, a 14.13% increase year-over-year. Wall Street analysts forecast a 14% year-over-year revenue growth in FQ4 2025. Amazon's revenue for the twelve months ending March 31, 2025, was $650.313B, a 10.08% increase year-over-year. The company is expected to hit US ecommerce sales of $540.29 billion, a 9.9% increase from 2024.

Fueling these gains is the market's confidence in Microsoft and Amazon's long-term bets on artificial intelligence. Microsoft's $80 billion AI investment and Azure's 33% year-over-year growth have solidified its role as an enterprise AI infrastructure leader. Amazon Web Services (AWS) continues to be a growth engine, driven by AI infrastructure demands and AI adaptation. AWS sales increased 17% year-over-year.

Apple's Challenges

In contrast, Apple has lagged, declining 5% year-to-date. Wall Street expects year-over-year Apple earnings growth of 1.4% and sales growth of 3.9% for Q3 2025. Apple's EPS growth was 7.8% during the last 12 months. Apple faces strategic crossroads with declining service margins (74.3%), geopolitical vulnerabilities, and a lack of cohesive AI infrastructure strategy compared to its cloud-first rivals. Apple is facing ongoing challenges.

The AI and Cloud Race

The broader tech sector's momentum is undeniable. Microsoft and Amazon's combined cloud and AI investments ($60+ billion in Q2 2024 alone) are reshaping global infrastructure. Microsoft holds the second spot in the global cloud infrastructure market. Amazon's AWS faces mounting pressure from competitors like Microsoft's Azure and Google Cloud, which have been aggressively pursuing market share.

Analysts advise shifting portfolios toward AI and cloud leaders with structural advantages, as Microsoft's Azure roadmap and Amazon's AWS dominance offer durable enterprise value. Microsoft's expansion of AI and cloud investments in Switzerland, committing $400 million to expand its data center infrastructure, further demonstrates its commitment to these areas.

Contrarian Investing in the AI Era

Contrarian analysts warn of overvaluation risks. The key is to distinguish between durable moats and speculative hype. Microsoft and Amazon's AI bets are underpinned by enterprise demand, while Apple's ecosystem, though sticky, faces headwinds from commoditization and regulatory scrutiny.