The acronym "FAANG" refers to Meta Platforms (formerly Facebook), Apple, Amazon (AMZN -0.86%), Netflix, and Alphabet (formerly Google).
They were given this acronym because they're considered some of the most influential companies in the tech sector, especially regarding their impact on the stock market due to high market capitalizations and growth rates. (I've recently seen people use "MANAMA" to account for Microsoft and the name changes of Meta and Alphabet.)
Tech stocks have rallied in 2023, largely due to artificial intelligence (AI) hype and the arms race that's since occurred. Despite being up 50% year to date (as of June 28), Amazon is still a great buy-and-hold stock to load up on before the next rally. Here's why.
You can't get around AI nowadays
All right, let's go ahead and get the AI talk out of the way. Has recent AI hype warranted the sudden surge that tech stocks have experienced? Probably not. However, looking past the hype, is it safe to assume AI is here to stay? Yes.
As an investor -- especially if you're interested in tech stocks -- you'll want exposure to AI in some capacity, but that doesn't mean chasing the hot name at the time or young companies making overzealous promises of "disruption." You'll want to invest in companies positioned for the long term. That's what Amazon can be.
Amazon has been using AI for a while now (product recommendations, warehouse automation, and customer service), but recent developments have expanded the possibilities greatly. It can better the user shopping experience by incorporating ChatGPT-esque product searches, improve Amazon Web Services' (AWS) capabilities, and improve digital advertising, just to name a few.
Amazon's CEO, Andy Jassy, said that generative AI (like ChatGPT and Midjourney) "presents a remarkable opportunity to transform virtually every customer experience."
Amazon could be on pace to double revenue by 2030
There are only two public companies in the world that bring in more revenue than Amazon. In its first quarter of 2023, it made $127.4 billion, up 9% year over year (YOY). While it's impressive, the growth is a slowdown from previous years.
However, even with modest annual revenue growth of around 10%, Amazon could double its revenue by 2030. That's not a walk in the park, but it's doable when considering the growth prospect of the industries it operates in.
The global e-commerce market is expected to grow 11% annually until 2030, according to GMD Research, and the global adtech and cloud computing markets are expected to grow 13.7% and 15.7% annually, respectively, until 2030, according to Grand View Research.
In all three of those industries, it's feasible to believe Amazon will grow at market growth rates, at minimum. Add in projected AI-fueled growth, and doubling revenue by 2030 is attainable. Assuming that growth translates to its stock price, Amazon's investors will be in great shape.
Cloud dominance should continue for the foreseeable future
While Amazon is a household name because of its e-commerce business, its MVP has been its cloud service, AWS, which owns a commanding global cloud market share (32%). E-commerce may bring in the revenue, but AWS brings in the profits thanks to its high margins.
AWS's sales have skyrocketed over the past eight years, growing from $1.4 billion in 2014 to $80.1 billion in 2022.
Still, investments shouldn't be made on past performance; it's all about the future. Investors have been questioning AWS's ability to remain dominant as Microsoft Azure and Google Cloud grow at impressive rates, but I believe these concerns, while not unwarranted, shouldn't be a deterrent.
It's ideally a situation where a rising tide lifts all boats. The pie may get bigger, but I don't see a situation anytime soon where a technological advantage (or lack thereof) causes AWS to lose major market share.
