Shares of retail and cloud computing giant Amazon (NASDAQ: AMZN) jumped 44.4% in 2024, as reported by S&P Global Market Intelligence. This remarkable increase mirrors the positive performance of many large-cap tech stocks participating in the expanding artificial intelligence (AI) sector.
Questions lingered at the start of the year, with investors concerned that Amazon was lagging behind competitors in the AI race. However, as the year progressed, Amazon addressed and alleviated those concerns.
Revamping AI Initiatives
As 2024 began, skepticism surrounded Amazon’s entry into AI. Its cloud rival Microsoft had made significant investments in OpenAI early on, seemingly positioning itself ahead in the AI cloud marketplace.
Yet, Amazon was not willing to fade into the background. Since 2023, the company has been actively developing its own AI cloud solutions.
In mid-2023, Amazon introduced its Bedrock cloud services, allowing developers to access a diverse range of leading third-party large language models. This offering may now represent the most comprehensive AI toolkit among cloud service providers.
Moreover, in late 2023, Amazon invested in Anthropic, a competitor to OpenAI, founded by Dario Amodei, a former OpenAI vice president. By November 2024, Amazon’s total investment in Anthropic had reached $8 billion, including a $4 billion funding round.
This partnership established Anthropic as a key player in the AI space, while also validating Amazon’s proprietary chips, Trainium and Inferentia, as competitive alternatives to the costly Nvidia GPUs commonly used for AI training.
Image source: Getty Images.
Apart from strategic investments, solid financial performance contributed to Amazon’s success. In the third quarter, AWS revenue growth surged to 19%, up from 12% the previous year. Importantly, the operating margin for this segment improved significantly, increasing from 30.3% to 38.1% within the same timeframe.
Meanwhile, Amazon’s e-commerce segments—North America and International—also saw growth, expanding in the high single-digits and low double-digits, respectively. E-commerce margins improved as well, with North America rising from 4.9% to 5.9% and International’s margin shifting from -0.3% to a positive 3.6%. These trends reflected the success of cost-cutting strategies and the transition to a regional delivery system in its e-commerce operations.
Long-Term Holding: Amazon
Throughout its history, Amazon has shown strength during economic downturns. Following a challenging period post-pandemic, the company’s recent performance highlights its robust management, even amid the departure of founder Jeff Bezos in 2021.
The stock may seem pricey at 35 times this year’s earnings expectations. However, Amazon has consistently prioritized long-term growth over immediate profits, and its ability to improve profit margins despite rising interest rates since 2022 speaks volumes about its adaptability.
Investors looking towards the future would do well to consider Amazon as a core holding, particularly those with an investment horizon beyond five years.
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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. Billy Duberstein and/or his clients hold positions in Amazon and Microsoft. The Motley Fool has positions in and recommends Amazon, Microsoft, and Nvidia. 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.
