Why Billionaire Steve Mandel’s Shift from Microsoft to Amazon Is a Strategic Win in the AI Era

Billionaire Steve Mandel’s recent decision to reduce his Microsoft stake and reinvest in Amazon reflects a calculated bet on the long-term trajectory of artificial intelligence (AI). While Microsoft’s Azure has outpaced AWS in recent quarters, Mandel’s shift underscores a belief that Amazon’s AI-driven infrastructure, despite current margin pressures, offers superior long-term growth and margin expansion potential. This move aligns with broader trends among top investors, who are increasingly prioritizing Amazon’s AI ecosystem as a cornerstone of their portfolios [1].

Amazon’s AWS remains the backbone of its AI ambitions. In Q2 2025, AWS generated $30.9 billion in revenue—a 17.5% year-over-year increase—and contributed 53% of Amazon’s operating profit, despite accounting for only 18% of total revenue [1]. This margin superiority, even amid a decline from 39.5% to 32.9% in Q2 2025, highlights AWS’s ability to absorb costs from AI infrastructure investments while maintaining profitability. By contrast, Microsoft’s Azure grew revenue by 39% year-over-year but faces similar margin compression due to aggressive AI spending [2].

Mandel’s rationale hinges on AWS’s strategic positioning for future AI demand. Analysts project AWS’s growth rate to accelerate to over 20% by 2026 as capacity expansions meet rising demand for generative AI workloads [3]. Morgan Stanley forecasts AWS’s 2026 capital expenditures to reach $134 billion, a 6–7% increase from prior estimates, to fuel AI-specific hardware like Trainium chips and expand its global footprint [3]. These investments, though costly, are expected to yield long-term returns: Amazon’s internal models suggest a $6.25 return for every $1 invested in AI infrastructure over a decade [4].

Microsoft, meanwhile, is not lagging. Azure’s 39% growth in Q4 2025 and projected 37% in Q1 2026 reflect its AI-first strategy, including 400+ AI-optimized datacenters and partnerships like OpenAI [5]. However, Azure’s operating margins, while robust, face downward pressure as Microsoft allocates $30 billion in Q1 2026 to address capacity constraints [5]. The company’s AI revenue is expected to exceed $45 billion by 2026, but this growth is already priced into its stock, whereas Amazon’s AWS remains undervalued relative to its future potential [5].

Mandel’s move also aligns with a broader trend among institutional investors. Billionaires like David Tepper and Philippe Laffont have positioned Amazon as a top holding, recognizing its dominance in cloud infrastructure and AI adoption [1]. Amazon’s AWS backlog of $195 billion in Q2 2025 further signals pent-up demand, which, once fulfilled, could drive margin recovery and sustained profitability [4].

In the AI era, the race is not just about current growth but about who can scale infrastructure to meet future demand. Mandel’s shift from Microsoft to Amazon is a bet that AWS’s long-term AI investments—despite near-term margin challenges—will outperform Azure’s more immediate gains. As AI workloads become the new normal, Amazon’s ability to balance innovation with profitability may prove to be the defining edge.

Source:
[1] Billionaire Steve Mandel Just Sold Microsoft Stock to Buy ..., [https://www.nasdaq.com/articles/billionaire-steve-mandel-just-sold-microsoft-stock-buy-dominant-artificial-intelligence-ai]
[2] Who's winning the Q2 2025 AI cloud race: AWS, Microsoft ..., [https://www.revolgy.com/insights/blog/q2-2025-ai-cloud-race-aws-microsoft-google-cloud]
[3] Amazon Web Services Growth Expected to Accelerate, [https://www.ainvest.com/news/amazon-web-services-growth-expected-accelerate-20-2026-morgan-stanley-2508/]
[4] Amazon's AI-Driven Future: Is the Stock's Pullback a ..., [https://www.ainvest.com/news/amazon-ai-driven-future-stock-pullback-strategic-entry-point-2508/]
[5] Microsoft's AI-Driven Margin Expansion and Cloud Dominance, [https://www.ainvest.com/news/microsoft-ai-driven-margin-expansion-cloud-dominance-buy-sustained-growth-2025-2508/]