Amazon’s (Nasdaq: AMZN) growth has been extraordinary in recent years. After going public in 1997, AMZN waited 21 years to reach a $1 trillion market capitalization in 2018. Just six years on, the stock has reached $2 trillion, and given the rapid emergence of generative AI, it seems that the wait until $3 trillion may be even shorter. Given that the stock rallied almost 30% over the first half of 2024, Amazon’s path to $3 trillion could be a short one. But what’s pushing AMZN higher? And can investors capitalize on the firm’s extraordinary growth?
Strong Fundamentals Woo Wall StreetAmazon is a market leader in cloud computing, and much of the company’s revenue stems from the sector. In its Q1 2023 earnings, Amazon’s net sales rallied 13% to 143.3 billion alongside an operating income of $10.4 billion. For the second quarter, Amazon is seeking to boost its sales to between $144 billion and $149 billion, alongside an operating income between $10 to $14 billion. Given that the firm is intent on continuing to build on its impressive Q1 performance in 2024, it’s unsurprising that Jefferies analyst Brent Thill recently upgraded the stock’s price target, with at least 18% upside forecasted. Thill highlighted Amazon’s cloud and advertising performance as key drivers for these boosts to expectations, however the stock may be capable of rallying further off the back of its generative AI ambitions.
Unlocking the Potential of Generative AIGenerative AI is forecasted to become a $1.3 trillion market by 2032, and this presents plenty of opportunity for Wall Street’s leading tech players. Amazon is already seeking to stake a major claim to become one of the world’s largest AI innovators, and has committed up to $230 million to support startups building generative AI applications. The investment will see $80 million reserved for funding Amazon’s second AWS Generative AI Accelerator program, which will offer cloud-based infrastructure for startups building generative AI models as a core part of their operations. As an eCommerce leader, Amazon has also been readily implementing its Generative AI innovations into its operations to aid the customer experience for its online shoppers. 2024 saw the introduction of Rufus, Amazon’s generative AI conversational shopping assistant designed to help customers to make more informed purchase decisions. Rufus is a specialized large-language model (LLM), and went live in July for all US customers via Amazon’s shopping app. The technology is designed to mimic having a shopping assistant on hand at all times, and is capable of interpreting and answering ‘tens of millions of questions’ by understanding customer queries on a more fundamental level.
Building Blocks in FintechIndications also suggest that Amazon is seeking to grow its presence in the world of fintech in the future, and the tech firm has ramped up its utility of generative AI tools throughout its finance teams with a view on assisting companies in testing and experimenting with the emerging technology. By augmenting generative AI with machine learning, Amazon has grown to assist finance employees with more complex datasets and actionable insights. This has paved the way for more focused fraud detection, contract review, financial forecasting, personal productivity, compliance, and tax-related insights. The implementation of generative AI solutions can help to reduce costs, boost efficiency, and minimize instances of human error. At present, these generative AI use cases are still in a mix of experimentation and implementation stages. We’ve seen Amazon improve its fintech capabilities throughout the year, and the firm recently launched a partnership with the Delhi Metro Rail Corporation (DMRC) to allow commuters to utilize and generate QR tickets online without the need for physical tickets that are time-consuming to produce and can easily be lost. The use of QR codes by Amazon serves a wide range of purposes and the matrix barcodes are flexible enough to offer additional engagement opportunities and CX enhancements that can help to unlock special offers and loyalty scheme rewards. With added Amazon Pay integrations, customers can access a range of rewards with their QR codes including companion discounts and free tickets for bulk purchases.
The Path to ProfitabilityCrucially, Amazon’s journey to a $3 trillion market cap and beyond will be supported by more widespread profitability both domestically and at an international level. Thanks to a conscious effort to by CEO Andy Jassy to become more profitable, Amazon has increased its North American operating margin from 1.2% in Q1 2023 to 5.8% in Q1 2024, and its international operating margin from -4.3% in Q1 2023 to 2.8% in Q1 2024. With Amazon nurturing its profitability alongside strategic generative AI investments, it’s extremely likely that investors won’t have to wait another six years for another trillion to be added to the firm’s market capitalization. Amazon is banking on the vast potential of generative AI, and is set to continue reaping the rewards of its strategy in its bottom line.More By This Author:Can AI Revolutionize The Efficiency Of Algorithm Execution In Institutional Trading?
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