Nvidia (NASDAQ: NVDA) is the stock for the artificial intelligence (AI) revolution, but it has been a market-destroying stock for much longer than the current hype suggests.
It has made a stunning leap in the past year, up over 200% and leaps and bounds Alphabet And Amazon (NASDAQ: AMZN) to reach the third largest market capitalization in the stock market at almost $3 trillion.
Is this the end of the road? Almost certainly not. Nvidia is still the leading producer of chips for generative AI, and has many more products driving progress in the technology industry.
However, some investors think their dollars will work better in other stocks right now. Several billionaire investors sold Nvidia stock in the first quarter of 2024, including Duquesne’s Stanley Druckenmiller, who sold 441,551 shares; Ken Griffin of Citadel Advisors, who sold 2,462,716 shares; Israel Englander of Millennium Management, who sold 720,004 shares; and John Overdeck and David Siegel of Two Sigma, who sold 420,801 shares.
Instead, many billionaire investors are buying another trillion-dollar market cap stock: Amazon. Millennium Management’s Englander bought 2,390,755 shares in the first quarter, while Citadel’s Griffin bought 6,577,909 shares. Ken Fisher of Fisher Asset Management bought 785,018 shares, and other billionaires also bought shares.
Should You Also Buy Amazon Stock?
The generative AI revolution
Like Nvidia, many of Amazon’s capabilities are tied to AI. Amazon has become a leader in AI technology, using it across its business empire.
First and foremost is Amazon Web Services (AWS), its cloud computing company. Amazon is the largest cloud computing company in the world, with 31% of the total market share.
Amazon has developed a competitive set of groundbreaking generative AI services to appeal to every type of business customer. It has three tiers, starting with tools that allow developers to create their own large language models (LLMs), moving to semi-custom solutions with Amazon’s own LLMs, and ending with ready-made programs that any layman can use. For example, it recently launched a new service that allows third-party vendors to enter a URL to a web page, and the tool automatically creates product descriptions on Amazon. More than 100,000 customers have already used AWS’s generative AI services.
AWS is gaining momentum and accelerating again after customers began cutting back in the inflationary environment. Sales rose 16% year over year in the first quarter of 2024 and Amazon, as usual, signed several deals with high-profile customers. AWS is a profit machine; Operating income in the first quarter rose 84% year over year to $9.4 billion and accounted for 61% of the total.
CEO Andy Jassy said: “I think there are really incredible growth opportunities ahead of us.” He explained that 85% of IT (information technology) spending is still not on the cloud, but this will change and create a huge growth opportunity for cloud computing companies.
E-commerce is on the rise
Let’s not forget e-commerce, which is almost synonymous with Amazon. Amazon accounts for 38% of total US e-commerce sales Walmart in second place with only 6%. This gap is too large for any challenger to close in the near future, and Amazon is continually improving its processes to maintain or widen the gap.
The company recently restructured its delivery infrastructure to eight regional warehouses instead of a national strategy, and that has already shown strong results. It delivers more packages to more customers in two days, and because it travels fewer miles on average, it costs Amazon less. Perhaps an even more important benefit is that as customers get more products faster, they will rely on Amazon for a greater share of their daily shopping needs, leading to greater loyalty that should yield positive effects in the long run.
According to Statista, e-commerce is expected to grow at a compound annual growth rate of 9.5% over the next five years. That’s straight organic growth for Amazon.
What Amazon is coming for now
Amazon is no slouch when it comes to streaming, which is included in a Prime subscription, although that has been changed to the ad-supported tier. It has switched to the two-tier system like its competition and now charges members more to watch without ads.
It has had a premier film studio since its acquisition of MGM Studios, and the combined efforts of Amazon and MGM are already creating popular and widely viewed content. It also sells its own streaming devices in addition to its range of smart devices.
One of the company’s new breakout activities is advertising. It uses the power of AI to show shoppers the products they’re already looking for and takes its advertising power to the ad-supported streaming level. Advertising is Amazon’s fastest growing segment, up 24% year over year in the first quarter, and there’s a lot of momentum here.
It’s not surprising that billionaires see the opportunity to owe shares of Amazon, and it’s a great candidate for retail investors as well.
Should You Invest $1,000 in Amazon Now?
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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no positions in any of the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet, Amazon, Nvidia and Walmart. The Motley Fool has a disclosure policy.
Billionaires Are Selling Nvidia And Buying These Stocks Instead was originally published by The Motley Fool
