What a difference a year makes. The turbulent market in 2022, plagued by soaring inflation and dismal stock performance, has given way to a remarkable rebound on Wall Street in 2023. The Nasdaq Composite, after a disheartening 35% decline in the prior year, found its stride and soared by 43% in 2023.

An examination of economic history reveals that such rallies have historically persisted. Since the Nasdaq’s inception in 1972, each year following a bear market rebound has yielded an average return of 19%. This established pattern alludes to the likelihood of the ongoing rally gaining momentum. While there are no certainties in investing, it behooves stock enthusiasts to heed the lessons of history.

Moreover, there is a compelling case that the resurgence in 2023 was instigated by the significant advancements in artificial intelligence (AI). As the technology continues to evolve, former incumbents and fledgling companies alike are racing to capitalize on these groundbreaking algorithms. It is unequivocal that two long-standing players, with entrenched AI strategies, are remarkably positioned to reap the benefits. Let’s explore both of them.

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Amazon’s AI Potential

Amazon (NASDAQ: AMZN) stands as one of the most prominent global companies, wielding influence across various consumer and commercial domains. AI integration has been pivotal to Amazon’s success, predominantly in e-commerce, cloud computing, and digital advertising, granting the company unparalleled reach.

Having cemented its status in digital retail, Amazon’s dominion in this realm remains unrivaled. Although 2023 data is pending, Amazon commanded approximately 38% of U.S. online sales in 2022, towering over the cumulative sales of the subsequent 14 competitors, as per Statista. An increasingly buoyant economy is poised to propel Amazon’s business further.

Despite encroachments from competitors, Amazon’s sustained employment of AI has consistently provided a competitive edge. The company persists in deploying generative AI to enhance product recommendations, curate content for Prime Video viewers, ensure the accuracy of product reviews, and assist third-party sellers in crafting compelling merchandise descriptions.

Amazon Web Services (AWS) was at the vanguard of modern cloud infrastructure provision and continues to hold sway in the market, boasting a market share of roughly 31%, per Canalys. AWS constitutes the primary audience and recipient market for Amazon’s AI offerings.

The company has also emerged as a formidable force in digital advertising, evidenced by a 26% year-over-year growth in ad revenue in the third quarter, surpassing the growth rates of industry leaders such as Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) and Meta Platforms, which grew by 9% and 24%, respectively.

Amazon’s foray into digital advertising is set for a substantial uplift, as the company rolls out “limited advertising” on Prime Video. Leveraging its AI capabilities, Amazon will ensure precision in targeting the intended audience for its digital ads.

Amazon’s recent AI expansion, particularly within its cloud segment, is primed to yield significant dividends. The introduction of Amazon Bedrock, featuring a multitude of AI models for AWS clients, will enable the development of business-centric generative AI applications, enriching the user experience.

Despite possessing multiple growth catalysts, the stock remains attractively priced, currently trading at a mere 2 times forward sales, a considerable markdown from its five-year average of 3.4. Savvy investors could seize the opportunity to acquire shares at a bargain before Amazon rides the current rally to new heights.

Alphabet’s AI Potential

Alphabet, akin to Amazon, presents a compelling case for investment, owing to its preeminent positions in two key markets and a robust foothold in a third.

Google’s unrivaled dominance in internet search, with a staggering 92% control of the market, as per StatCounter, has been perennially reinforced by AI-driven enhancements to search algorithms, sustaining its indomitable lead. Alphabet recently unveiled plans to fortify this advantage by embedding generative AI features into its search engine.

Alphabet’s supremacy in internet search underpins its reign in the digital advertising arena, where it captures 30% of worldwide ad spending, per Digiday. This leadership position is expected to endure as 2023 draws to a close.

Google is empowering advertisers with an array of generative AI-powered tools, facilitating seamless customization of ad content for greater campaign efficacy. The ongoing resurgence in ad expenditure is poised to fuel further ascension for Alphabet in the upcoming year.

Furthermore, Google Cloud, one of the top three cloud infrastructure providers, has outpaced its rivals in growth for six of the past seven quarters, cementing a captive audience that constitutes a ripe market for Alphabet’s repertoire of AI offerings.

For all its potential for growth, Alphabet’s stock remains historically undervalued,