Amazon's (AMZN -2.80%) massive web presence has made it one of the leading technology companies. But despite its leadership in e-commerce and cloud services, it was not immune to the 2022 bear market. Even though it has risen 30% from recent lows, the stock still trades at a discount of almost 45% from its all-time high.

However, its cloud leadership has helped spark an interest in artificial intelligence (AI). Not only can it help bring AI to the companies it serves, but it also makes Amazon more explicitly a cloud and AI investment. 

Why the focus on artificial intelligence?

The emphasis on AI comes down to one factor: growth. According to Grand View Research, the global AI market will have a compound annual growth rate of 37% through 2030. If Grand View is correct, that means a market valued at $197 billion this year will grow to more than $1.8 trillion over the next seven years.

Moreover, contrary to this public image, Amazon Web Services (AWS), the company's cloud computing segment, typically accounts for most or all of Amazon's quarterly profits. It generated $5.1 billion in operating income from just over $21 billion in revenue.

In contrast, Amazon's two e-commerce segments reported $107 billion in revenue and $349 million in operating losses. And property and equipment spending reached almost $58 billion in the 12 months ending in the first quarter of 2023. Much of that occurred as Amazon spent heavily on its technology infrastructure and fulfillment network.

The company also forecasts lower property and equipment spending in future quarters. Still, spending on its fulfillment network will probably absorb the brunt of those cuts, a factor that will surprise those who see Amazon as primarily an e-commerce company.

Amazon's approach

Amazon focuses on two subfields of AI, machine learning and deep learning. Machine learning, as the name implies, involves software learning from recorded data. It also optimizes functions, finds hidden data patterns, and classifies data.

Deep learning overlays algorithms (which are often non-linear) to better understand data. CEO Andy Jassy touched on this in his 2022 shareholder letter. He announced something that could redefine its place in the AI arms race. The company will work to improve its generative AI capabilities, improving large-language models that will help it compete with OpenAI's ChatGPT.

To this end, Amazon believes it will help other companies "democratize" this technology through AWS. That enables its clients to build applications that leverage large-language models without compromising privacy and security. The technology also extends to programming languages that can make code suggestions to developers, increasing productivity.

AI and Amazon stock

Thanks to AI, Amazon should become a more explicitly tech-oriented investment. AWS has long generated most of the company's profits, but most of its revenue came from retail, the area where Amazon invested heavily to build a fulfillment network.

The plan to de-emphasize fulfillment effectively makes e-commerce more of a loss leader for the company. Since it could gain greater visibility as an AI stock, it could help inspire a long-awaited recovery for Amazon.