Amazon (AMZN 0.39%) and Alphabet (GOOGL 0.36%) (GOOG 0.52%) delivered lackluster returns in the first half of 2025. Amazon shares traded sideways, while Alphabet stock actually declined 7%. But certain Wall Street analysts expect the companies' market values to top $3 trillion in the next year. Here's what that means for shareholders:

• Brian Nowak at Morgan Stanley recently increased his target price on Amazon to $300 per share. That implies 34% upside from its current share price of $233. It also implies a market value of $3.1 trillion.
• Paul Chew at Phillip Securities has set Alphabet with a target price of $250 per share. That implies 37% upside from its current share price of $183 . It also implies a market value of $3 trillion.

Here's what investors should know about Amazon and Alphabet.

Image source: Getty Images.

Amazon: 34% implied upside

Amazon has a strong presence in three growing industries: It runs the largest e-commerce marketplace outside of China, it is the third largest ad tech company, and Amazon Web Services (AWS) is the largest cloud services company. Through 2030, Grand View Research expects online retail sales to grow at 11% annually, ad tech sales to grow at 14% annually, and cloud computing sales to grow at 20% annually.

Artificial intelligence (AI) should be a significant tailwind for Amazon. The company is using generative AI to optimize demand forecasting, inventory placement, and last-mile delivery routes, which should improve profitability. The company is also using generative AI to make warehouse robots more efficient. Additionally, Amazon has introduced AI tools that help brands plan, create, and optimize ad campaigns.

In cloud computing, AWS is primed to benefit from the AI boom simply because it is the largest public cloud as measured by customers and partners. But Morgan Stanley expects its status as the primary cloud provider for AI start-up Anthropic to become a more significant tailwind in the coming years, adding at least 1.5 percentage points to revenue growth annually.

Tariffs are the greatest source of downside risk, especially with respect to China. However, management is optimistic about its retail business. "When you have the broadest selection like we do, and 2 million-plus global sellers like we do, you're better positioned to help customers find whatever items matter to them at lower price points than elsewhere," CEO Andy Jassy told analysts.

The Wall Street consensus says Amazon's earnings will increase at 10% annually through 2026. That makes the current valuation of 36 times earnings look relatively expensive. But I think analysts have missed the mark. Amazon has a good shot at earnings growth of 15%-plus annually given its strong position in three markets, not to mention it beat the consensus estimate by an average of 21% in the last six quarters.

Alphabet: 37% implied upside

Alphabet has a strong presence in two industries. It is the largest ad tech company in the world because of a plethora of popular web properties, including Google Search and YouTube. And Alphabet's Google Cloud is the third largest cloud services company. As mentioned, the ad tech and cloud computing markets are forecast to grow at 14% annually and 20% annually, respectively, through 2030.

Alphabet is projected to lose market share in digital advertising because of competition, and some investors worry generative AI tools like OpenAI and Perplexity will hurt the company by changing the way people search the internet. However, Alphabet is leaning into that technology with generative AI overviews in Google Search and the results are encouraging. Users engagement and commercial search volume are increasing.

In cloud computing, Forrester Research has recognized Alphabet's Google as a leader in AI infrastructure and large language models, and Gartner has recognized its leadership in machine learning platforms. Expertise in those areas helped the company gain a percentage point of market share in cloud services in the past year. Market share gains could continue as more businesses develop AI products.

Antitrust scrutiny is the greatest source of downside risk. In the past year, courts have twice ruled against Alphabet, determining it has an illegal monopoly in internet search and ad tech software. A federal judge will make decision regarding remedies in the internet search case in August, and the remedies hearing related to its monopoly in ad tech software will happen in September. While unlikely, the judges could force the company to break up.

Wall Street expects Alphabet's earnings to increase at 8% annually through 2026. That makes the current valuation of 20 times earnings look tolerable, but I think analysts are underestimating future growth. Earnings increased 48% in the most recent quarter, and Alphabet beat the consensus estimate by an average of 14% in the last six quarters.