Ranking the best "Magnificent Seven" stocks to buy for 2026. Here's my No. 5 pick.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This is part three of a seven-article series in which I rank the best Magnificent Seven stocks to buy for 2026 (in reverse order). Tesla came in last place, followed by Apple in the sixth spot -- as both stocks are not worth buying right now.

Amazon marks a turning point. Although it's my fifth pick, I would categorize Amazon as a decent, but not a high-conviction buy for 2026. Here's why.

AWS or bust

Amazon soared after its latest earnings report, as its cloud computing services segment -- Amazon Web Services (AWS) -- delivered impeccable results. This was a sigh of relief, as AWS had been growing slower than peers like Microsoft Azure and Google Cloud.

Amazon began by selling books online and eventually became the world's largest online retailer. But today, AWS is the company's crown jewel. The segment continues to drive Amazon's cash flow and overall profitability, making up for what can be lackluster results in its other segments.

Amazon's dependence on AWS is a key reason why the stock isn't higher on my list. While AWS is more valuable than any other cloud service, Amazon as a whole is less balanced than Microsoft and Alphabet.

If cloud computing growth slows, Microsoft can rely on its highly profitable software business, growing gaming portfolio, and other strengths. Microsoft is monetizing AI across its business segments, driving sustainable, high-margin growth.

Similarly, Alphabet's Google Search is its centerpiece, but the company is rapidly expanding its Gemini AI assistant app. Despite rival AI-first information resources like ChatGPT, Google Search continues to grow at a solid rate -- fueled by embedding AI overviews powered by Gemini into Google Search queries. Aside from Google Cloud and Google Search -- YouTube, Android, and Google Other Bets, which include Waymo and Google Quantum AI -- round out Alphabet as a balanced, yet high-octane growth stock.

Amazon loves spending money

Another factor that sets Amazon apart from the other Magnificent Seven stocks is its lack of stock buybacks and dividend payments. Amazon hasn't repurchased stock for years. And because it rewards many employees with hefty stock-based compensation packages, Amazon's share count has increased over time, diluting existing shareholders.

By comparison, Apple spends a boatload of cash on buybacks, and Microsoft also actively repurchases stock and pays more dividends than any other U.S. company.

Meta Platforms and Alphabet have been ramping up their buyback programs in recent years and instituted their first-ever dividends last year. And even Nvidia is now buying back significantly more stock than it issues in stock-based compensation, making the stock a better value.

Pouring excess cash back into the business instead of repurchasing stock can accelerate earnings growth. But the strategy is aggressive and risky. Because if Amazon fails to deliver or AWS loses market share, investors will question the capital allocation strategy.

Amazon is an OK buy for 2026

Amazon is a decent buy on the strength of AWS alone. But it's not as compelling as Nvidia, Microsoft, Meta Platforms, or Alphabet.

Find out how I rank those four Magnificent Seven names in my upcoming rankings.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.