Amazon’s AI Advancements Propel Stock to New Heights amidst Bull Market
The bull market on Wall Street is entering its third year and has just achieved its best performance since 2011. Earlier this week, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite reached record levels.
The Role of Artificial Intelligence
Recent breakthroughs in artificial intelligence (AI) are a significant reason for this record surge. Emerging in early 2023, generative AI is defining new boundaries by enhancing efficiency and producing original text and images. This has the potential to elevate productivity and boost company profits.
Many may not realize that Amazon (NASDAQ: AMZN) has been implementing earlier AI technologies for years. This early integration positioned Amazon to excel when AI innovations surged last year. With its established AI solutions, strong footing in cloud computing, robust digital retail presence, and growing digital advertising sector, Amazon stands out as a significant player in the tech landscape.
Indicators of Economic Recovery
In recent years, economic challenges highlighted by high inflation have faded, giving rise to a strong recovery. Consumer sentiment has reached its highest level in six months, and the Federal Reserve recently announced the latest in a series of interest rate cuts.
This economic rebound has positively impacted Amazon’s results. For the third quarter, the company reported revenue of $159 billion, an 11% increase from the previous year, with diluted earnings per share (EPS) soaring 52% to $1.43.
A robust performance across Amazon’s major segments contributed to these results. Online retail sales in North America improved by 9%, while international sales rose by 12%. The rebound of Amazon Web Services (AWS), its cloud service division, continued with a 19% growth rate—the highest since late 2022. Meanwhile, digital advertising, one of the fastest-growing segments, jumped by 19%.
A Multifaceted Stronghold
Amazon remains unrivaled in online retail, having captured 38% of U.S. e-commerce sales in 2023—more than the next 15 competitors combined, as reported by eMarketer. Projections suggest Amazon will grow its share to 40% in 2024.
In the realm of cloud computing, Amazon leads with AWS, holding 33% of the market as of the second quarter, according to Canalys. Microsoft Azure and Alphabet‘s Google Cloud follow closely in second and third place, capturing 20% and 10%, respectively.
During the third-quarter earnings call, CEO Andy Jassy highlighted Amazon’s strides in AI: “In the last 18 months, AWS has released nearly twice as many machine learning and [generative] AI features as the other leading cloud providers combined.” These advancements are seen as vital in rejuvenating AWS growth.
Moreover, Amazon has expanded its digital advertising reach. Beyond ads on its e-commerce site, the company now features commercials on Prime Video, ad-supported Freevee, Amazon Music, and Twitch, effectively leveraging AI to target potential customers, making advertising their fastest-growing sector.
Wall Street’s Optimistic Outlook
On Thursday, Amazon reached a new all-time high exceeding $210. Many analysts consider it still highly advisable to buy, with 95% of the 66 analysts covering the stock in October rating it as a buy or strong buy.
Following robust results, J.P. Morgan analyst Nicolas Jones reiterated an outperform rating with a price target of $285—representing a 36% upside from Thursday’s close. Jones cites Amazon’s dominance across various sectors, growing digital advertising, and increased demand for AI-driven solutions bolstering AWS.
Amazon’s current valuation is noteworthy; its stock trades at about three times forward sales, making it one of the most appealing options among its “Magnificent Seven” peers. This valuation stands out, especially for a company excelling in multiple growth industries.
Is Amazon a Good Investment Right Now?
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JPMorgan Chase is an advertising partner of Motley Fool Money. 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. Danny Vena has positions in Alphabet, Amazon, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, JPMorgan Chase, 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.
