The bull market that has captivated Wall Street is just entering its third year and posting its best performance since 2011. Dow Jones Industrial Average, S&P500And Nasdaq Composite reached record highs earlier this week.
One of the factors driving this record run is recent advances in artificial intelligence (AI). The technology, which first hit the scene in early 2023, is unlike anything that has come before. Generative AI can not only streamline processes but also create original text and images, potentially increasing productivity and driving more profit to the bottom line.
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Investors might be surprised to learn that Amazon(NASDAQ: AMZN) has been using previous forms of AI for decades, helping the company get off to a flying start early last year. This history of deploying AI has helped Amazon shape the AI ​​solutions it offers to its customers. Add to that the company’s dominant positions in cloud computing and digital retail and its strong position in digital advertising, and you have a company that is a quadruple threat in the technology industry.
Strong growth across the quartet of companies has driven shares to record highs, and Wall Street says this could be just the beginning.
Image source: Getty Images.
There is no denying that there have been challenges in recent years, marked by macroeconomic headwinds and decades of high inflation. These conditions have recently given way to a robust recovery, with consumer confidence reaching its highest point in more than six months. Moreover, the Federal Reserve Bank just announced the second in its continuing series of interest rate cuts as the specter of inflation fades.
The recovery of the economy has helped improve Amazon’s results. For the third quarter, revenue of $159 billion rose 11% year over year, while diluted earnings per share (EPS) of $1.43 rose 52%.
Improvements in each of the company’s key operating segments contributed to the results. Online retail sales in North America increased 9%, while international sales increased 12%. The reacceleration of Amazon Web Services (AWS) – the company’s cloud infrastructure service – continues, rising 19%, the highest growth rate since late 2022. Amazon also continued to gain ground in digital advertising, one of the fastest growing segments . , which increased by 19%.
Amazon is unparalleled in the online retail sector it pioneered. The company will capture 38% of US e-commerce sales by 2023, more than the next 15 largest competitors combinedaccording to data provided by eMarketer. The company’s leadership is expected to continue this year as Amazon is expected to account for 40% of online sales in the US by 2024.
Amazon is also the undisputed leader in cloud computing, another company that didn’t exist before the company pioneered it. According to research firm Canalys, AWS is the leader in cloud infrastructure, capturing 33% of the market in the second quarter. Microsoft Azure and Alphabet‘s Google Cloud took the No. 2 and No. 3 positions, with 20% and 10% of the market, respectively.
During the company’s third-quarter earnings call, CEO Andy Jassy updated investors on Amazon’s AI progress: “Over the past 18 months, AWS has nearly doubled the machine learning and [generative] AI has the same features as the other leading cloud providers combinedHe believes these efforts have helped revive Amazon’s cloud growth, which has waned in recent years.
Let’s not forget Amazon’s growing digital advertising segment. In addition to the ads it runs on its e-commerce website, the company has expanded its reach through ads appearing in Prime Video, the ad-supported streaming services Freevee and Amazon Music, and the video game streaming service Twitch. It has also become quite adept at using AI to help its ads reach their target market. This has made advertising Amazon’s fastest growing business in recent years.
The combination of e-commerce, cloud computing, AI and digital advertising makes Amazon a quadruple threat, something few companies ever achieve.
Amazon hit a new all-time high above $210 on Thursday, but many on Wall Street still think this is an unqualified buy. Of the 66 analysts covering the stock in October, 63 of them (or 95%) rated it a buy or strong buy, and none recommended selling.
In the wake of the company’s robust results last week, JP Morgan Analyst Nicolas Jones maintained an outperform (buy) rating on the stock, while assigning a Street-high price target of $285. For investors following the price at home, this represents an additional increase of 36% compared to Thursday’s record high. Jones cited Amazon’s dominance in online retail, its gains in digital advertising and the demand for AI that AWS continues to drive.
One of the most attractive reasons to buy Amazon is its valuation. The stock is currently selling for around three times forward sales, making it one of the most attractively priced stocks among its ‘Magnificent Seven’ peers. It’s also a bargain for a company with leadership positions so much growth industries.
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JPMorgan Chase is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Danny Vena has positions at Alphabet, Amazon and Microsoft. The Motley Fool holds positions in and recommends Alphabet, Amazon, JPMorgan Chase and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
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