Amazon (NASDAQ: AMZN) may not be the first company that comes to mind when considering AI stocks to buy. Names like NVIDIA (NASDAQ: NVDA), Google (NASDAQ: GOOG), or Microsoft (NASDAQ: MSFT) often dominate the conversation. However, a closer look at Amazon’s strategic positioning reveals that it can be one of the most compelling AI stocks to invest in, particularly through the dominance of Amazon Web Services (AWS) in the cloud computing market. This article explores whether Amazon, already a technology giant, is a great stock to buy now.
AWS profitability
While Amazon is known to be a retail company, AWS contributes a significant portion of Amazon’s overall profitability. In FY2023, AWS generated $90.8 billion in revenue, a 16% of total Amazon’s revenue of $574.78 billion, with an operating income of $24.63 billion, accounting for 67% of the company's total operating income of $36.85 billion. The Q3 report for FY2024 showed that their net sales have increased 11% year-over-year. The net income increased almost 55%. AWS segment sales increased 19%. AWS’s importance as a profit and cash generator cannot be overlooked, especially as the global demand for cloud and specifically AI services continues to grow.
AWS's global market share
AWS’s leadership in the cloud computing market is a key advantage. According to Statista, AWS was holding a 31% market share as of Q3 2024—significantly ahead of competitors like Microsoft Azure (20%) and Google Cloud (11%). According to Gartner, the research firm anticipates a 25% increase in cloud system infrastructure as a service (IaaS) spending in 2025, reaching $212 billion, compared to this year's growth of 21%. As AI workloads become a larger part of cloud spending, AWS’s extensive portfolio of AI solutions positions it to capture a disproportionate share of this growing market. Another driver is AWS’s investment in custom AI infrastructure. With the development of Inferentia and Trainium chips, AWS can offer customers cost-efficient solutions for AI workloads, reducing reliance on NVIDIA GPUs and improving pricing competitiveness.
Amazon's AI investments
Amazon’s investments in AI companies and startups are another key indicator of its commitment to the technology. In 2023, Amazon spent $85 billion on technology and infrastructure, which Amazon says includes research and development of new and existing products. In March 2024, Amazon announced that it completed a $4 billion investment in Anthropic, a direct competitor to OpenAI. The announcement mentioned that Anthropic will also be depending on AWS as its primary cloud provider for mission-critical workloads, and that Anthropic will use AWS Trainium and Inferentia chips to build, train, and deploy its future models. Anthropic’s models were also adopted on AWS. In November 2024, Amazon announced an additional $4 billion investment in Anthropic, bringing the total investment to $8 billion. This significant investment demonstrates Amazon’s intent to keep up in the AI space, a critical factor for investors seeking exposure to AI-driven growth.
Amazon’s AWS division solidifies its position as a key player in the AI industry. With its leadership in cloud computing, a diverse portfolio of AI services, and ongoing investments in infrastructure and partnerships, AWS is well-equipped to benefit from the global shift toward AI-driven solutions. This, combined with the growth of the global cloud infrastructure market, indicates that Amazon’s stock may be one of the top choices when considering investing in AI-focused companies and could be a great stock to buy now.
AMZN's past performance
According to Stoculator, if you invested $1,000 in Amazon 10 years ago, it would be worth $14,222.09 (as of January 01, 2025). That’s an annual return rate of 30.4% and a total return of 1,422.21%.
Disclaimer: The information provided in this article is for informational purposes only and does not constitute financial advice. Conducting due diligence is essential before making any investment decisions. This involves thoroughly researching and verifying all relevant information about a potential investment.