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Unearthing the True Gem: Amazon’s AI Potential
Unearthing the True Gem: Amazon’s AI Potential

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Amazonโ€™s Position in the AI Revolution

Delving into the realm of artificial intelligence (AI), investors often gravitate towards Nvidia. The undisputed champion in AI chips, Nvidiaโ€™s stock has ascended over 200% in the past year, drawing many beneficiaries. Yet, Nvidia is just one piece of the puzzle.

Enter the โ€œMagnificent Seven,โ€ an elite tech cohort marching alongside Nvidia in the AI revolution. Among them shines Amazon, offering a unique blend of AI prowess and an eclectic range of high-growth pursuits.

An investor talks on the phone and looks at something on a tablet.

Image source: Getty Images.

Amazon Riding the E-Commerce Wave

Amazon, a household name synonymous with delivering essentials to entertainment, isnโ€™t just another e-commerce giant. The global retail e-commerce market is set to exceed $8 trillion by 2027, per Statista.

Amazonโ€™s strategic maneuvers amidst economic turbulences in 2022 bolstered its operational efficiency, vital for sustaining its market dominance. Transitioning to a regionally-based fulfillment model, Amazon strategically positioned its inventory for swifter deliveries and enhanced cost efficiency, striking a chord with cost-conscious consumers.

While Amazonโ€™s cloud arm, Amazon Web Services (AWS), forms the profit backbone, its e-commerce division, generating 40% of operating income, underscores the paramount significance of sustained growth in this domain.

Amazonโ€™s AI Revolution

Incorporating AI across e-commerce and cloud platforms, Amazon optimizes its operations for enhanced profitability. Through AI, Amazon streamlines delivery routes, slashes operational costs, and enhances customer experience, ensuring a competitive edge.

AWSโ€™s AI suite, catering from chip selection to customizable AI models, positions Amazon lucratively as the foremost cloud provider. Riding the AI wave both as a consumer and provider spells profits for Amazon and its shareholders.

Valuation: Amazon vs. Nvidia

Amazonโ€™s dynamic AI ventures, coupled with its e-commerce juggernaut, render its 42x forward earnings valuation a testament to its multifaceted growth potential. In contrast, Nvidiaโ€™s 36x forward earnings valuation symbolizes a formidable contender but lacks Amazonโ€™s diversified risk profile.

Amazon emerges not merely as an AI-centric investment prospect but an epitome of holistic growth, solidifying its status as a top choice amid the esteemed Magnificent Seven league.

Should you invest $1,000 in Amazon right now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Foolโ€™s board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Nvidia. 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.

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