Amazon (AMZN -1.64%) is no stranger when it comes to tech innovation. In its nearly 30-year history, the company has been a pioneer in everything from cloud computing infrastructure to e-commerce to video streaming to voice-activated technology like Alexa and beyond.
With artificial intelligence (AI) moving to the forefront as the next major boom in technology, it shouldn't be a surprise to find Amazon there as well. Let's take a look at three of the ways Amazon is changing the retail industry with AI technology.
Image source: Amazon.
1. Just Walk Out technology
Probably the clearest example of Amazon's efforts to disrupt the retail landscape with AI is through its Just Walk Out technology, which is what underpins its Amazon Go stores and allows customers to shop and pay for items without ever checking out. Just Walk Out tech relies on a network of cameras, sensors, algorithms, and computer vision to monitor guests in stores and see what they take off the shelves and leave the store with. Amazon is also using similar technology in its Dash carts, which allow customers to skip the checkout at Amazon Fresh stores by monitoring what they put in their carts.
Just Walk Out seems to have disruptive potential as eliminating the need for cashiers and checkout stations is a cost-saver as well as a way to add convenience for customers. However, Amazon Go stores seem to have mixed results so far. As part of its recent cost-cutting plan, the company shut down eight of its Go stores, leaving it with 23 locations.
2. Shopping recommendations
Amazon pioneered e-commerce in the U.S. and has dominated the industry for decades now as it's faced no pure-play direct challenger in e-commerce. Along the way, it's innovated a number of new features that have gone mainstream, including product reviews and product recommendations, which are made by artificial intelligence and machine learning algorithms.
With the advent of new generative AI tools, it now appears that Amazon is planning to integrate a chatbot that allows the customer to discuss the recommendations they're given and refine them from there.
According to a recent job posting, Amazon is searching for a software engineer that can help Amazon reimagine its product search with "an interactive conversational experience."
Among the many possibilities for ChatGPT technology is that it helps online shoppers more easily find what they're looking for. Shoppers and investors should expect this to become more normal over the coming years.
3. Advertising
You may not think of Amazon as an advertising business, but advertising has become one of its largest revenue streams, and it's the No. 3 digital advertising platform in the U.S., behind Alphabet and Meta Platforms.
The company brought in $39.3 billion in advertising revenue in its last four quarters, and that's likely high-margin revenue as Amazon's digital real estate is valuable to its marketplace merchants.
It only seems natural then that Amazon would look to leverage AI in its ad machine. The company is working on building a team to use AI tools for merchants to create photos and videos to use in their ads to help sell their products.
The company continues to see potential in its ad business, especially as it expands Prime video into sports and taps into other digital media, including Amazon Music, its Kindle e-books, Amazon music, and even digital screens in its Amazon Fresh stores.
Running more effective ads will allow the company to charge more money for ads, better monetizing its digital real estate.
Is Amazon stock an AI stock to buy?
Amazon hasn't gotten as much attention as peers like Microsoft and Alphabet in AI, but the company shouldn't be overlooked in artificial intelligence as a company of its size and, with its history of tech innovation, is likely to be a significant player in AI.
While it's too soon to call Amazon a buy because of AI, with new products like Bedrock, the stock is certainly worth adding to your AI watchlist. At the very least, artificial intelligence adds to the stock's upside potential as Amazon has the advantage of being able to leverage the new technology across multiple industries, including e-commerce, cloud computing, advertising, and digital media.
