There is no question artificial intelligence (AI) is top of mind for most investors in 2023. Why wouldn't it be? Research firm McKinsey & Company estimates the technology could add $13 trillion to the global economy by 2030. Cathie Wood's Ark Investment Management places that figure at a whopping $200 trillion.

Therefore, it's no surprise investors are rushing to buy stocks that could benefit from the AI revolution. Semiconductor giant Nvidia has become the most popular, because it owns almost the entire market for data center chips capable of processing AI workloads. As a result, its stock price has soared 238% so far this year.

But Nvidia isn't the only game in town, and Wall Street's best investors are holding another stock with the potential to become a leader in the emerging AI industry.

A digital render of a circuit board with a chip in the center, inscribed with the letters AI.

Image source: Getty Images.

Amazon stock is a favorite among billionaire investors

Amazon (AMZN -0.26%) is home to Amazon Web Services (AWS), the world's largest cloud computing platform. And since the cloud is where AI models are developed, trained, and deployed, it makes perfect sense this company could emerge as a major player in the industry. 

As a result, some of the smartest money managers own its stock. These three stand out:

  1. David Tepper's hedge fund, Appaloosa, bought more than 1.1 million Amazon shares in the recent second quarter of 2023, ended June 30. It took the fund's total holding to more than 3.1 million shares worth a cool $436 million. Tepper is one of the most savvy investors on the Street, and his success has even earned him an NFL team: He purchased the Carolina Panthers in 2018.
  2. Ken Griffin is the head of Citadel, one of the largest hedge funds in the world, with $62 billion in assets under management. The fund more than tripled its position in Amazon during Q2, and it now holds 5.1 million shares worth $705 million. While Citadel's position in Amazon is still a small percentage of its overall portfolio, it's clear the Wall Street titan has identified some real potential in this company recently. 
  3. Warren Buffett is one of the richest people in the world, and he has steered his Berkshire Hathaway investment company to market-beating returns for more than 50 years. Berkshire owns 10.5 million shares of Amazon worth over $1.4 billion. While Buffett's firm hasn't been a buyer of the stock since 2019, he has repeatedly praised the company and even expressed regret for not buying in during its early days. 

Those investors could make a fortune from their Amazon bets, and let's explore why you might want to join them. 

Amazon is racing to the front of the AI pack

As I touched on earlier, Nvidia has become the go-to provider of AI data center hardware. But earlier this year, it was Microsoft making all the noise following its $10 billion investment in ChatGPT developer OpenAI. The point is, AI has several layers, and each presents a substantial opportunity. 

Amazon wants to dominate the three core areas of AI, starting with hardware. Its cloud computing arm, AWS, operates data centers using Nvidia's semiconductors. The new AWS EC2 P5 infrastructure empowers customers with up to 20,000 of Nvidia's latest H100 graphics chips (GPUs) worth of computing power to help them rapidly train and deploy AI models. But Amazon is also developing its own chips, which could be a game changer for the company's position in the AI industry.

Second, Amazon wants to expand the number of large language models (LLMs) it offers to customers. The company's CEO, Andy Jassy, says businesses using AWS would prefer to adopt existing LLMs they can build upon, rather than developing their own from scratch. Doing so requires mountains of data and is cost intensive. Therefore, AWS offers customers its own LLM called, Titan, in addition to several powerful third-party models from AI developers like Anthropic.

Third, Amazon is growing its presence on the consumer-facing software side. Generative AI applications like ChatGPT fall into this category, and AWS already offers tools like CodeWhisperer, which is capable of producing computer code to accelerate programming tasks. Plus, AWS customers can use Amazon Lex to design, test, and deploy conversational AI interfaces into their businesses.

Why investors might want to follow Wall Street into Amazon stock

Amazon stock might be poised for strong long-term upside on the back of the AI revolution, and since it's currently trading 25% below its all-time high, this is a great chance for investors to buy it at a discount. 

The company has struggled over the past 12 months because of the tough economic environment. Elevated inflation and rising interest rates have forced consumers to spend money more carefully, and remember, despite its AI opportunity, Amazon's largest business is still e-commerce. A recovery in that segment will be key to a higher stock price in the short term.

There were positive signs in the recent second quarter of 2023. Amazon's online sales grew by 5% year over year, which marked an acceleration from Q1. That's great news, considering sales shrank during 2022. And thanks also to better-than-expected growth from its AWS cloud business in Q2, the company smashed Wall Street's estimates at the top and bottom line overall. 

With Amazon's largest business on the upswing and an enormous AI opportunity on the horizon, it's no surprise the stock is on the radar of Wall Street's billionaires. It's unlikely to trade at a discount forever, so investors might want to take this opportunity to buy.