Amazon's AI-Driven Growth: Leveraging Cloud Computing and E-commerce for Future Success

Where Will Amazon Stock Be in 5 Years? | The Motley Fool

Amazon (AMZN -1.44%) ended 2024 on a high note, up 44% in 52 weeks. But more importantly, it's coming into the year with all systems go to leverage its e-commerce platform to gain market share and harness the power of artificial intelligence (AI) to supercharge its cloud platform. 2025 is starting off strong, but you should buy stocks that have long-term potential. Let's see where Amazon might be five years from now. Amazon has been steadily gaining market share in e-commerce over the past few years, and eMarketer expects it to have surpassed 40% of total U.S. e-commerce sales in 2024. It got a lot of competition from smaller companies that went online early in the pandemic, but it has improved its logistics networks and done a lot of other things to reinforce its top position and expand its lead. It recently switched from a national to a regional warehouse system, and that's important as physical store chains use their physical footprint as a distribution channel. Both Walmart and Costco Wholesale are leveraging their many stores all over the country to ship orders quickly and cheaply, and they also have the advantage of being able to offer omnichannel options like store pickup that Amazon can't. Instead, Amazon is doing what it does best: offering the quickest and cheapest delivery options for online orders. The company is also adding tons of products to ensure that its Prime customers continue to rely on it for everything they need. It keeps improving speed, which increases the chance that customers will keep using it for their everyday essentials and more, and it's also making efforts to cut costs. Same-day orders increased 25% year over year in the third quarter, and same-day deliveries are also one of its cheapest systems to operate. It recently piloted a new warehouse model in Louisiana that incorporates new robotics technology. It's already cutting processing time by 25%, which should drive a 25% improvement in costs. In five years, Amazon should have even more of the e-commerce market, which itself is growing, generating organic growth opportunities. As it gets bigger, growth might slow down. Amazon Web Services (AWS), Amazon's cloud computing division, accounts for 31% of the total global cloud market according to Statista. Second-place Microsoft Azure has 20%, and while its lead isn't as dramatic as in e-commerce, it's still hefty. Clients who were budgeting when inflation skyrocketed are spending again, and more importantly, clients who want to get in on generative AI are flocking to AWS' platform. That's because Amazon has developed an incredibly powerful AI business that offers all kinds of products and features to meet almost any demand. Management describes it as a three-tier system, with tools for developers to create their own large language models (LLM), its own Bedrock system for midsize enterprises to use Amazon's LLMs, and plug-in solutions for small business clients. AWS sales growth accelerated in the third quarter to 19% year over year, and generative AI is already a billion-dollar business. However, CEO Andy Jassy thinks it's in its infancy and has massive long-term potential. On December's third-quarter earnings call, he said, "It is a really unusually large, maybe once-in-a-lifetime type of opportunity." In five years, AWS should still be growing at a fast pace. It also accounts for most of Amazon's operating income -- 62% in the third quarter -- and it should help Amazon expand its margins. Streaming isn't the first thing people usually think of when they think of Amazon, because Amazon is so much more. But it's still competitive in streaming, and it owns MGM Studios, providing it with first-rate content that rivals the other big players. It has the rights to Thursday Night Football, and the Cowboys-Giants game in the third quarter was the most-streamed regular season football game ever. It also has highly rated series like The Lord of the Rings: The Rings of Power. It recently rolled out an ad-supported tier like Netflix and Walt Disney, combined with a robust advertising business to generate new opportunities in the ad business. In five years, Amazon should be able to stay competitive, adding new content, beefing up the ad part, and potentially making another acquisition. The ad business has been Amazon's fastest-growing operation for a while. Having access to Amazon's hundreds of millions of Prime members, who are all online to shop, is a huge benefit for advertisers. Amazon's data-rich, AI-based system also gives advertisers the tools to succeed. Amazon is constantly acquiring new companies while launching new products and businesses to create more sales opportunities. It's investing in healthcare and its pharmacy business, and it's made several acquisitions over the past few years. It recently acquired AI company Anthropic, and I expect that its coming rollouts and acquisitions will also be focused on growing the AI business. Amazon stock beat the market in 2024, and it's well positioned to do it again this year. Even though it's already made millionaires, this company still has incredible growth prospects. It may not be the same as a young upstart, but it also comes with less risk. Amazon stock should amply reward investors over the next five years.

Why Amazon Rallied 44.4% in 2024 | The Motley Fool

Like most of the "Magnificent Seven," Amazon had a great 2024 as investors piled into large-cap technology stocks participating in the artificial intelligence (AI) revolution. But Amazon had also entered the year with some big questions hanging over it, as investors wondered whether it had fallen behind rivals in the AI race. Yet over the course of the year, Amazon put many of those concerns to rest. Coming into 2024, some thought Amazon was caught late to the AI game. After all, cloud rival Microsoft invested early in OpenAI, the company behind ChatGPT, which appeared to give Microsoft the early lead in AI cloud workloads. But did anyone think Amazon, of all companies, would take this lying down? Since 2023, Amazon has gotten to work on its own AI cloud services. First, leveraging its size as the largest cloud provider heading into the AI revolution, Amazon rolled out its Bedrock cloud services in mid-2023. Amazon Bedrock offers a variety of competing third-party large language models for developers, giving perhaps the most diversified AI tool portfolio of any cloud provider. Additionally, in late 2023, Amazon invested in OpenAI rival Anthropic, which is run by OpenAI's ex-vice president of research, Dario Amodei, and is available on Bedrock. Amazon then followed up that initial investment with two more investments in Anthropic in 2024. Amazon's latest investment in November amounted to $4 billion, bringing its total investment in Anthropic to $8 billion. In conjunction with that investment, Anthropic agreed to use AWS as its primary cloud provider and training partner, while also committing to use Amazon's Trainium and Inferentia chips to train and run its future AI models. The collaboration appeared to both validate Anthropic as a key player in the AI races and a serious OpenAI competitor, while also validating Amazon's in-house chips as worthy tools against the current AI training standard of expensive Nvidia GPUs. But it wasn't just press releases and investments that drove Amazon higher; positive financial results did, too. AWS revenue growth accelerated 19% in the third quarter, up from 12% a year earlier. And perhaps just as important, the segment's operating margin expanded from 30.3% to 38.1% over that same period. Not to be outdone or forgotten, Amazon's e-commerce segment also picked up the pace and expanded margins, too. Amazon's North America and International e-commerce empires continued their solid growth in the high-single-digits and low-double-digits, respectively. Meanwhile, North America e-commerce operating margins expanded by a full percentage point, from 4.9% to 5.9%, while the International business expanded margins from -0.3% to a positive 3.6% margin over the past year. Amazon spent the past couple of years cutting costs and transitioning to a regional delivery system in its e-commerce business, and this year's rapid margin expansion appears to show those efforts paying off. Amazon has demonstrated resilience in the face of several bear markets and recessions over its corporate life. After a difficult post-pandemic slowdown, the past year's improvements show Amazon's management culture to be as smart and resilient as it's ever been, even following the 2021 retirement of founder Jeff Bezos. While the stock can't be considered cheap at 35 times this year's earnings expectations, Amazon has always appeared expensive to many, as it has long prioritized long-term thinking over short-term profits. That being said, the company's ability to expand profit margins this year after the rapid rise in interest rates since 2022 speaks volumes about Amazon's dynamism. With this commitment to both innovation and long-term returns on investments, Amazon remains a solid core holding for any investor with a longer-term investment horizon beyond five years.