Amazon's (AMZN 0.54%) stock has soared about 55% since Jan. 1, rallying based on its increasing potential in artificial intelligence (AI) and a recovering e-commerce business. The company has had a rocky couple of years as 2022's economic downturn caused steep declines in its online retail sales and slowed revenue growth in its cloud platform Amazon Web Services (AWS).
However, the first quarter of the year brought its North American segment back to profitability, and its international segment reported improvements.
Meanwhile, Amazon doubled down on its AI efforts in the first half of 2023, making major investments in India's booming cloud market and expanding into chip production. The company may have stumbled last year, but its stature in tech, as well as its vast resources, allowed it to stay profitable, proving its resilience.
As this retail giant recovers and expands, now is an excellent time to learn more about Amazon and potentially become an investor. Here are three things about Amazon that smart investors know.
1. Investing in India's booming cloud market
India has quickly become a crucial cloud growth market. Data from IDC shows the country's public cloud services industry is projected to expand at a compound annual growth rate (CAGR) of 23% through 2026 and hit $13 billion. As a result, Amazon is substantially investing in the sector as it strives to snap up market share and profit from the expected growth.
According to Reuters, Amazon will invest about $13 billion in India by 2030, on top of the $6.5 billion it's sinking into its e-commerce business in the country. Amazon will start by developing India's cloud infrastructure, increasing its data centers. The company runs two data centers in the region, but the expansion will see that figure rise and support more than 100,000 full-time jobs.
The tech giant's focus on India has come as the country is taking steps to attract leading cloud companies after a recent spike in demand for digital services. Amazon's leading cloud market share gives it an edge in the market. Meanwhile, the expansion will be favorable to its growing position in AI.
2. Moving into the hardware side of AI
The launch of OpenAI's ChatGPT last November kicked off an AI boom. Microsoft's position as the biggest investor in the start-up granted it exclusive licenses for multiple AI models. However, Microsoft's gain appeared to be Amazon's loss, highlighting that the retail giant had fallen behind in AI.
As a result, Amazon spent the first half of this year expanding its position in the industry, unveiling several new generative AI services on AWS. The company strategically avoided launching a competitor to ChatGPT. Instead, it has focused on serving other niches of AI cloud services, setting itself apart from companies like Microsoft and Alphabet by venturing into chip development.
NASDAQ: AMZN
Key Data Points
In an interview with CNBC at the start of this month, CEO Andy Jassy revealed Amazon is gearing up to directly compete against chipmakers like Nvidia and AMD by developing its own hardware. Jassy said the company's chips will have "much better price-performance than you'll find anywhere else," which will be attractive to companies currently paying Nvidia's high pricing.
The chips are called Inferentia and Trainium and will allow Amazon to run its AI models on hardware tailored specifically to its services. This potentially will give it an edge over the competition.
3. A stable long-term option
Over the last decade, Amazon's annual revenue climbed 590%, while operating income has increased by more than 1,500%. Meanwhile, the company's stock soared around 783% in the same period.
Amazon has grown into a tech behemoth, giving it the financial resources to continue growing, even under challenging conditions. For instance, despite macroeconomic headwinds that led to steep declines in its e-commerce business last year, Amazon's revenue rose by 9% year over year in fiscal 2022.
The company's dominance in cloud computing and e-commerce has strengthened its business and diversified its earnings, making its stock an attractive long-term buy. Both industries have vast growth potential, with Amazon well-positioned to profit significantly from their development. When you consider all this along with the company's steadily expanding push into AI, it may be a good idea to invest in Amazon stock right now.
