2 Monster Stocks to Buy and Hold for the Next 20 Years

Great companies will sometimes see their stocks fall. But what truly makes a monster stock is a business with excellent growth characteristics, built on durable competitive advantages, or moats, that can keep earnings growing for decades through rough patches.

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) and Amazon (NASDAQ: AMZN) fit that description. These monster stocks have slightly outperformed the Nasdaq-100 -- an index that includes the best of breed in the tech sector -- over the last 10 years.

Both just dropped after earnings amid worries about heavy artificial intelligence (AI) spending, providing investors a more attractive entry point to buy and hold these monster stocks for the next 20 years.

1. Alphabet: A full AI stack with a cloud margin of 36%

Alphabet's moat is built on its ownership of every piece of the artificial intelligence (AI) puzzle: its own chips, called Tensor Processing Units (TPUs); its Gemini models; its cloud business; and products used by billions of people. CEO Sundar Pichai said this full-stack approach "drives a lot of efficiency" and gives Alphabet options across a wide range of opportunities. That's a combination few companies can copy.

The third-quarter report showed that advantage paying off. Google Cloud revenue more than doubled to about $31 billion, and its operating margin jumped to 36% from 24% a year ago. In other words, the cloud business is growing fast and getting more profitable at the same time.

Still, the stock fell about 13% in early trading the day after earnings on Oct. 30. Wall Street didn't seem to like the continued heavy spending on data centers, which pushed free cash flow negative in the quarter.

But the sell-off leaves the shares trading at a more attractive 17 times 2026 earnings estimates -- a discount to the Nasdaq-100 average forward earnings multiple of 21. That valuation looks too modest for one of the leading AI companies whose finance chief expects returns on that spending to be "meaningfully above our cost of capital." For a 20-year investor, that dip looks like an opportunity.

2. Amazon: AWS growth is accelerating

Amazon's moat is huge in two giant businesses: Amazon Web Services (AWS), its cloud computing arm, and a retail network that keeps getting faster at delivering packages and cheaper to run. CEO Andy Jassy said Amazon is "on a path to have two" businesses with a trillion dollars in annual revenue, AWS and its online store. That kind of scale is hard for rivals to match.

Q3 results showed AWS revenue surging 39% year over year, marking its sixth straight quarter of faster growth and its fastest pace in nearly five years. Jassy believes the industry is in a "10-to-20-year cycle" of companies moving their computing to the cloud.

Even so, shares slid about 7% in pre-market trading on Oct. 30 as investors focused on the company's heavy AI spending. That puts the stock at about 30 times 2026 earnings estimates and about 23 times 2027 estimates.

Wall Street may not like the heavy capital spending and negative free cash flow. Still, Jassy called AI "a once-in-a-lifetime opportunity." The post-earnings sell-off is a chance to invest in that opportunity at a discount.

The risk: AI spending that could weigh on free cash flow

The risk for both is that massive AI spending continues to weigh on free cash flow. If AI demand cools before those data centers pay off, profits could fall short, and the stocks could go through a stretch of underperformance relative to the broader market.

Still, for patient investors, businesses that can afford to spend the most will have the most compute capacity and may be best positioned to win in AI. That opportunity is why Alphabet and Amazon are quality tech stocks to hold for the next 20 years.

John Ballard has positions in Amazon. The Motley Fool has positions in and recommends Alphabet and Amazon. The Motley Fool has a disclosure policy.