AI Companies Like Amazon and Meta Shine Amid Economic Uncertainty
Despite economic uncertainties, investing in top artificial intelligence (AI) companies remains a sound choice. The productivity benefits gained from AI adoption are likely to attract investment and drive solid returns for investors over the next decade.
Amazon’s Steady Investment in AI
Amazon (NASDAQ: AMZN) has seen its shares decrease by 31% from recent peaks. While tariffs are raising import costs and could dampen consumer demand, the potential for cost reduction and profit growth through AI far outweighs short-term retail sales pressures.
Last year, Amazon’s revenue grew 11%, reaching $638 billion, primarily due to growth in non-retail services like Amazon Web Services and advertising. Its net income nearly doubled to $59 billion.
AI advancements are allowing Amazon to enhance inventory placement and optimize delivery routes, significantly reducing operational costs. Additionally, the company employs robotics for more efficient order processing in its warehouses, promising long-term cost savings and earnings growth.
Amazon is also pushing for same-day deliveries, with drone delivery already implemented in select areas, paving the way for expansion. Faster delivery increases purchase frequency and inventory turnover, positively impacting cash flow.
While a recession may pressure Amazon’s business this year, the stock is currently valued attractively. Analysts project the company’s earnings will grow at an average annual rate of 20% in the coming years, indicating the potential for solid gains for investors.
Meta Platforms: A Resilient Player in Digital Advertising
Meta Platforms (NASDAQ: META), owner of Instagram, has experienced a 15% drop in its share price this year amid recession fears, despite being a leader in digital advertising with over 3.3 billion daily active users.
Following a significant downturn in 2022 when Meta’s stock fell 64%, it rebounded impressively by 311%. While the company may struggle during economic slumps, current lower prices provide a buying opportunity for investors acknowledging its future growth potential. Meta operates in a $700 billion digital advertising market.
Last year, Meta’s revenue and earnings rose by 21% and 60%, respectively, bolstered by the launch of Meta AI, which has been adopted by over 700 million users. The company utilizes AI to efficiently target ads, employing the Andromeda machine learning system, developed with Nvidia, to analyze vast datasets to optimize ad placements.
This strategic use of AI has resulted in heightened engagement across Meta’s platforms, assisting advertisers in maximizing returns on investment and accurately targeting users. With a robust user base and net income of $62 billion last year, Meta is positioned as a strong long-term investment. Analysts forecast an average annual earnings growth of 14%, while the stock trades at a relatively low price-to-earnings ratio of 21.
Investors seeking high-potential growth opportunities in uncertain times should consider these two leading technology companies. Both Amazon and Meta exemplify how AI can enhance efficiency and profitability in the tech landscape.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
