The AI-associated stock has experienced an astronomical rise of 230,000% since its initial public offering (IPO), indicating continuing substantial prospects.
There aren't many stocks that have seen a gain of 230,000% since their initial public offerings, especially without dividends and within less than three decades. Nevertheless, these are typically global titans entering value territory and initiating dividends.
Amazon (AMZN 0.10%) stands out due to this substantial gain and its potential for further growth. The market was skeptical before the advent of artificial intelligence (AI) two years ago, but Amazon, as usual, took the opportunity to develop a robust AI platform, which has become a significant catalyst for its business.
Here's why this multi-billion dollar 'multi-bagger' stock still has room for growth.
Why Generative AI Excites Everybody
If you've been living under a rock, you're not aware of the impact that generative AI is making on various aspects of life, particularly in business operations. Companies that offer generative AI services already rake in billions, and this figure is projected to reach trillions in the near future.
There are several types of business-to-business services that are available. These include hardware like the chips manufactured by Nvidia and the production capabilities provided by Taiwan Semiconductor Manufacturing, as well as software solutions like those offered by companies like ChatGPT and Amazon.
Generation AI could be the next big trend that's being hyped up to revolutionize the world before it eventually fades away. However, its current impact on various sectors, including time and money savings, is already undeniable. According to Statista, the market is expected to grow tenfold by 2030, at a compound annual growth rate of 46.5%. It's no wonder everyone's paying close attention.
Introducing AI to Amazon
Amazon is already benefiting from this revolution in its AI business, with its AI-driven revenues estimated to be billions of dollars. CEO Andy Jassy sees this as just the beginning, with more significant gains yet to come. He has repeatedly emphasized that the shift to the cloud is still in its early stages, and with Amazon's robust AI platform, it stands to gain immensely from this transition.
Amazon, as you know, operates on a unique scale, reach, and budget-driven strategy. It launched its AI solutions business with three tiers to cater to every budget and provide solutions for every client. Amazon Web Services (AWS) is the world's largest cloud computing company, and its management understands that it can leverage its client base to grow its AI business and create an additional revenue stream.
The entry-level tier on its platform involves creating custom large language models (LLMs) for large clients, the mid-tier offers Amazon's LLMs along with a client's data to drive semi-customized generative AI models, and the high-tier, for smaller enterprises, includes ready-to-use solutions.
McKinsey notes that the development of Amazon Bedrock, in the mid-tier, was a turning point in the trajectory of generative AI. Bedrock links AWS client databases with Amazon and other LLMs for an efficient and effective generative AI experience.
Some of the services Amazon offers for third-party e-commerce sellers include videos created from a single image and full marketing campaigns based on prompts. Despite being a service-oriented business, Amazon is also developing its own graphics processing units (GPUs), the chips that power generative AI, to compete with partner Nvidia's chips and offer more affordable solutions to its cost-conscious clients.
Fueling Amazon's Stock Surge
Amazon's stock dropped by 50% in 2022, but it has since recovered, with a 166% surge since hitting rock bottom, around the time it launched its AI business.
All of Amazon's sectors are experiencing growth at the moment, with e-commerce growing steadily and advertising and AWS adding more fuel to the mix. AWS accounts for 17% of total sales in the third quarter, but it contributes 62% to operating income. Generative AI is a substantial growth driver for AWS and Amazon, and this high-margin growth will also boost the bottom line. 2025 could be another remarkable year for Amazon and its shareholders, with even more growth in the long term.
In relation to the impact of generative AI on various business sectors, investing in companies like Amazon, which is actively leveraging this technology, could be a lucrative opportunity. With the generative AI market projected to grow tenfold by 2030, companies with robust AI platforms, such as Amazon, have the potential to generate significant financial returns for investors.
Given Amazon's AI-driven revenues estimated to be billions of dollars and its unique scale, reach, and budget-driven strategy, its AI business and subsequent stock performances are closely monitored by finance and investment analysts.
%2C%20indicating%20continuing%20substantial%20prospects.){kind=link}