Chipmaker Nvidia has seen tremendous success from this trend. With unprecedented demand for its data center GPUs, Nvidia’s revenue nearly tripled last year, and its share price soared by 145%. However, for investors who missed out on those gains, the AI boom is far from over.
Bloomberg Intelligence forecasts that generative AI sales will skyrocket by 2,040%, reaching $1.4 trillion by 2032, with an annual growth rate of 41%. This growth will benefit many companies, but Amazon (NASDAQ: AMZN) is particularly well-positioned to capitalize on this trend. Here’s why.
Amazon’s AI Investments Across Its Core Businesses
Amazon is a dominant force in three rapidly expanding markets. It leads North America and Western Europe in e-commerce, ranks as the third-largest digital advertiser globally, and holds the top spot in public cloud infrastructure and platform services with Amazon Web Services (AWS).
Amazon is harnessing AI to enhance efficiency and create new revenue streams across its key segments:
E-commerce: In February, Amazon launched Rufus, a generative AI shopping assistant for consumers. The company also introduced AI tools for sellers to create product listings and uses AI and computer vision in its North American fulfillment centers to identify product defects before shipping. Machine learning optimizes warehouse inventory and last-mile delivery, increasing logistics efficiency.
Digital Advertising: Amazon’s AI tools enable marketers to create engaging lifestyle images for their products, potentially reducing advertising costs. Additionally, AI helps target relevant sponsored product ads to consumers on the marketplace.
Cloud Computing: AWS has developed custom AI chips as a cost-effective alternative to Nvidia GPUs and added features to its machine learning platform, SageMaker, and its generative AI platform, Bedrock. AWS CEO Andy Jassy noted that AWS has introduced more machine learning and generative AI features than all other major cloud providers combined in the past 18 months.
AWS holds a 32% share of cloud infrastructure and platform services (CIPS) spending, surpassing Microsoft Azure by nine percentage points. This leadership positions AWS to benefit as businesses increase their AI investments.
Jim Kelleher from Argus stated, “As the leading provider of infrastructure-as-a-service and other cloud services, AWS is uniquely positioned in the growing AI-as-a-service market.” According to Morgan Stanley, AWS and Microsoft Azure are the public clouds most likely to gain share in generative AI over the next three years.
Amazon Stock Valuation and Future Prospects
Retail e-commerce sales are expected to grow by 8% annually through 2028, and digital ad spending is projected to increase by 10% annually during the same period, per eMarketer. Retail media is one of the fastest-growing ad verticals, with Amazon likely to outpace the average and potentially overtake Meta Platforms as the second-largest ad tech company by 2030.
The International Data Corp. (IDC) predicts a 19% annual increase in public cloud spending through 2028, with AI platform services expected to grow at 51% annually, outpacing other cloud computing sectors. This is favorable for AWS, given its CIPS leadership.
These projections suggest Amazon is well-positioned for double-digit sales growth in the coming years, with earnings expected to rise slightly faster due to cost control measures. Analysts forecast a 25% annual increase in Amazon’s adjusted earnings through 2025, making its current valuation of 42 times adjusted earnings appear reasonable. For patient investors, now might be an opportune time to consider a small investment in Amazon stock.
Should You Invest $1,000 in Amazon Right Now?
StocksJar’s Expert Take: StocksJar’s team of experts has identified potential high-growth opportunities in the AI sector. While Amazon presents a compelling case due to its strategic AI investments, it’s essential to consider a diverse portfolio.
If you’re looking for top-performing stocks, we’ve found some promising picks that could deliver impressive returns in the evolving AI landscape. Stay tuned for our exclusive insights and recommendations tailored for today’s market conditions.
