The Rise of Tech: Amazon Eyes $3 Trillion Market Cap

In the past, giants like General Electric and ExxonMobil dominated the stock market, with market caps of $319 billion and $283 billion, respectively, in 2004. Fast forward to today, and technology is leading the way. Apple and Nvidia are presently vying for the top spot, each with a market cap of $3.4 trillion (as of this writing), while Microsoft follows closely behind at $3 trillion.

Amazon (NASDAQ: AMZN) stands at a market cap of about $2.1 trillion. Although this figure may suggest that its entry into the $3 trillion club is distant, the company’s stock has surged by 39% over the past year and 132% over the past five years, indicating its potential for rapid growth.

Image source: Getty Images.

Economic Recovery Boosts Amazon’s Prospects

For several years, Amazon faced challenges due to a struggling economy. However, recent indicators suggest a recovery is underway. Consumer confidence has surged, recording its strongest monthly gain since March 2021, while fears of a recession have decreased to the lowest level in over two years. The Federal Reserve’s recent interest rate cuts and a historically low unemployment rate are also promising signs of an improving economy.

These positive changes have increased spending in e-commerce and cloud services, evident in Amazon’s recent financial results. For the third quarter, the company achieved net sales of $159 billion, a rise of 11% from the previous year. Diluted earnings per share (EPS) reached $1.43, marking a 52% increase.

Amazon’s various operating segments contributed to this growth. In North America, sales grew 9% year over year, while international sales saw a 12% increase. Amazon Web Services (AWS) experienced a robust recovery with a 19% year-over-year growth, reaching its highest growth rate in nearly two years. The advertising sector, which spans across Amazon’s growing services, also increased by 19%.

Pioneering Positions in E-Commerce and Cloud Services

Amazon pioneered e-commerce and continues to lead in this area, capturing 38% of all U.S. online retail sales last year—surpassing the combined total of its next 15 competitors, as reported by eMarketer. By the end of 2024, Amazon is projected to account for 40% of online sales in the U.S.

The company also established itself as a leader in cloud computing, with AWS holding a 33% market share by the end of the third quarter. While Microsoft Azure and Alphabet’s Google Cloud follow with 20% and 10% respectively, AWS’s 19% growth was eclipsed by Azure’s 33% and Google Cloud’s 36%.

Amazon’s position as the cloud leader amplifies its ability to offer AI models and related services. The company has a strong history of integrating AI into its operations, from product recommendations to optimizing delivery routes.

A notable area of growth for Amazon is its advertising segment. The company has expanded its advertising reach beyond its e-commerce platform to services such as Prime Video, Amazon Music, and Twitch. Recently, Amazon announced that it will discontinue its Freevee streaming service, incorporating it into Prime Video, creating new opportunities for advertisements. As a result, advertising has become one of Amazon’s fastest-growing revenues.

Charting the Course to $3 Trillion

Currently, Amazon’s market cap is around $2.1 trillion, indicating it needs an approximate 42% increase in stock price to reach the $3 trillion mark. Analysts predict that Amazon will generate $637.7 billion in revenue in 2024, which would give it a forward price-to-sales (P/S) ratio of about 3. Assuming its P/S remains constant, Amazon would need to boost its revenue to around $902 billion annually to achieve a market cap of $3 trillion.

Wall Street forecasts an 11% annual revenue growth for Amazon over the next five years. If consistent, this growth could bring Amazon to a $3 trillion market cap as early as 2028. Given that Amazon’s revenue has surged by approximately 442% in the past decade, this target is within reach.

Currently, Amazon’s stock trades at roughly 3.4 times sales, a figure consistent with its five-year average of 3.3. Considering the multitude of industry-leading sectors it operates within and its growth potential, this valuation remains justifiable.

Is Amazon a Good Investment Now?

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Suzanne Frey, an executive 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. Danny Vena has positions in Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends GE Aerospace and has issued the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool maintains a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.