Artificial Intelligence (AI) is the new big thing. Technology is evolving rapidly, and it can play a significant role in the growth of companies that become leaders in the field.
Many investors are looking to cash in by investing in corporations that look ahead of the pack. There are many options, but the e-commerce titan Amazon (NASDAQ: AMZN ) is one of the best. Let's find out why this is a great AI play to buy and keep forever.
Amazon's Position in AI
The company has taken several steps in AI. Last year, it announced Bedrock, a service it provides through its cloud computing platform, Amazon Web Services (AWS). Bedrock helps developers build creative AI applications like ChatGPT, whether they focus on speech, images or videos.
Amazon also invested $4 billion in Anthropic, an AI-focused company that developed Cloud, a family of creative AI platforms that compete with ChatGPT's latest version, GPT-4. Is.
Cloud is also the name of the large language model developed by Anthropic that Amazon now offers through Bedrock. A $4 billion investment might sound like a lot, but it's not that much for Amazon, which generated about $32 billion in free cash flow last year. Management believes the investment in AI will pay for itself many times over, and AWS has a run rate of $100 billion.
AI doesn't make up a large portion of that total yet, but CEO Andy Jesse said he believes it will generate tens of billions of dollars in revenue over the next several years. AWS is already one of Amazon's most important growth drivers, especially on the bottom line, with its huge margins. Last year, Amazon's sales totaled $574.8 billion, up 12% year over year.
AWS sales grew slightly faster, up 13.3% year over year, to $90.8 billion — or just 15.8% of the company's total top line. But its operating income of $24.7 billion makes up about 67 percent of Amazon's total operating income of $36.9 billion. And Amazon's AI work will only improve AWS's performance.
More than AI Play
There are many ways to invest in AI, and doing so through a company like Amazon is a great way to reduce risk. A pure-play AI company could skyrocket, but it could also sink if its initiatives don't pay off or if the industry doesn't grow as big as many analysts currently think.
However, Amazon's business is strong and diverse enough to handle these potential outcomes. The company is a leader in e-commerce, with a 37.6% share of the US market as of last year. E-commerce still has a long runway to grow, so Amazon will continue to benefit from this market for years. Its e-commerce business enjoys a network effect: the platform becomes stronger and more valuable the more sellers and buyers join it.
This makes the company's website more attractive to advertisers. According to the management, its advertising business is growing rapidly. Elsewhere, the company is a leader in video and music streaming.
In addition to its leadership in several growth-ready industries and a strong competitive edge, something else makes it an all-time great stock: The company has developed a culture focused on innovation and customer satisfaction. Is.
Amazon didn't become a leader in e-commerce or cloud computing by accident. And it will likely continue to invest in promising sectors, including its work in health care, which is slowly but surely taking shape.
The bottom line is this: Amazon is a great stock to cash in on the rise of AI, e-commerce growth, and cloud computing. Long-term investors should not go wrong with this strong, versatile business.
Should you invest $1,000 in Amazon right now?
Before buying stock in Amazon, consider this:
gave Motley Fool Stock Advisor The analysis team only indicated what they believed. 10 Best Stocks For investors to buy now… and Amazon was not one of them. 10 stocks that made the cut could generate monster returns in the coming years.
Consider when Nvidia This list was created on April 15, 2005… If you invested $1,000 at the time of our recommendation, You will have $488,186.!*
Stock Advisor Provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks every month. gave Stock Advisor There is a service More than four times S&P 500 Returns since 2002*.
View 10 Stocks »
*Stock Advisor returns on April 22, 2024
John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, an Amazon subsidiary. Amazon has Prosper Junior bikini positions. The Motley Fool has positions and recommends Amazon. The Motley Fool has a Disclosure Policy.
1 Unstoppable Artificial Intelligence (AI) Stocks to Buy and Hold Forever was originally published by The Motley Fool.