Amazon: A Look at Growth and Future Prospects Amid AI Concerns

Amazon (NASDAQ: AMZN) is one of the most successful stocks ever.

As a key player in the “Magnificent Seven,” Amazon has climbed the ranks to become one of the world’s most valuable companies. Since its IPO, the stock has skyrocketed more than 200,000%. This means that an initial investment of $1,000 would be worth over $2 million today.

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Throughout its history, buying Amazon stock has generally proven to be a wise decision, thanks to its leadership in e-commerce and cloud computing—industries that it helped develop and still dominates.

But the question remains: will Amazon continue to be a strong investment in 2025?

Image source: Getty Images.

Current Performance of Amazon

Amazon remains a leader in its primary sectors of e-commerce and cloud computing, though it is entering a more mature phase. While its growth rate has decelerated compared to previous years, it is still considered robust for a company of its stature.

In the third quarter, revenue climbed 11% to $158.9 billion, largely due to its cloud computing division, Amazon Web Services (AWS), which saw a 19% increase in revenue to $27.5 billion.

Operating margins have also improved as growth in high-margin businesses such as AWS, marketplace services, and advertising exceeds that of other segments. Notably, operating income from AWS surged from $7 billion to $10.5 billion year-over-year. Revenue from third-party seller services rose 10% to $37.9 billion, while advertising revenue increased 19% to $14.3 billion.

As long as growth in these high-margin areas continues, Amazon’s profit margins are likely to keep improving. The company’s operating margin reached 11% in the third quarter, setting a new record. After years of long-term investments, concerns regarding profitability seem to be fading.

Looking Ahead to 2025

When considering 2025, Amazon faces pressing questions about its approach to artificial intelligence (AI). Unlike its peers in the “Magnificent Seven,” Amazon’s AI strategy has appeared unclear.

The company struggled to develop an AI chatbot, while competitors like Microsoft with OpenAI, Alphabet with Gemini, and Meta Platforms with Meta AI have made significant strides. Instead, Amazon has opted to partner with Anthropic, the creator of the AI chatbot Claude. Amazon has invested a total of $8 billion in Anthropic, driven by the increasing adoption of Claude in AWS.

Additionally, Amazon is refining its managed service, Amazon Bedrock, which offers users resources to create and scale generative AI applications. Given its strong position in cloud computing, Amazon is positioned to capitalize on the growing demand for AI-related technologies.

As it moves into 2025, the company will likely continue to develop its AI strategies, even if it doesn’t need to dominate this area for its primary businesses to thrive. Still, it will need to catch up in the AI race.

Should You Buy Amazon in 2025?

With solid growth and robust margins, Amazon remains a strong contender in the market. Its current price-to-earnings ratio is 50, which appears reasonable, considering its potential for profit growth.

Even as it invests heavily in AI, Amazon’s dominance in e-commerce and cloud computing seems secure. While it may continue to grow in 2025, with a market cap around $2.5 billion and its earnings multiple, investors should note that its potential upside may be limited.

This stock is still a worthy addition to a long-term investment portfolio.

Should You Invest $1,000 in Amazon Now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has 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.