Amazon (AMZN -1.42%) has come a long way since it started as an online book retailer almost 30 years ago. It has become a household name worldwide, dominating e-commerce markets in multiple countries. Its meteoric rise provided the resources to expand to countless other industries, from cloud computing to AI, space satellites, grocery, consumer robotics, and more.
The company's success sent its stock soaring more than 133,000% since it went public in 1997. For non-tech companies, Amazon's rapid growth might indicate it has little room left to offer investors substantial gains. However, tech is an ever-expanding market that massively profits from its innovative nature. And as one of the biggest names in tech, Amazon remains an attractive investment.
Here's why it's not too late to invest in Amazon stock.
Amazon stock is down 30%
Shares of Amazon skyrocketed during COVID-19 lockdowns in 2020 and 2021 as homebound consumers showed up in droves to its e-commerce website. However, an economic downturn in 2022 brought the company's stock crashing back down alongside spikes in inflation and reductions in consumer spending.
This year Amazon enjoyed a solid recovery as its retail business returned to profitability. Yet its stock remains down around 30% from the high it hit in July 2021, which could suggest it has plenty of room for growth in the coming months. Wall Street seems to agree, as Amazon's average 12-month price target of $169 projects stock growth of 29%.
Investors have grown increasingly bullish about Amazon after repeated improvements in its e-commerce segments and its expanding position in artificial intelligence (AI). In the second quarter of 2023, the company's North American segment achieved over $3 billion in operating income after reporting $627 million in losses in the year-ago quarter. Various restructuring moves over the last year are paying off, and put Amazon back on a growth path.
As a result, the dip in its stock has prompted an exciting investment opportunity.
Expanding in multiple areas of AI
Amazon was featured in countless headlines this year as it rapidly expands in AI, a market projected to develop at a compound annual growth rate of 37% through 2030. The company appeared to fall behind in the arena last year, with Microsoft's investment in ChatGPT developer OpenAI allowing it to get a head start. However, Amazon has since pivoted its business to the booming industry, and has plans to use AI across its product lineup.
In June, the company's cloud platform, Amazon Web Services, unveiled several new AI tools that allow businesses to boost productivity in activities such as web development, advertising, doctor-patient consultations, and more.
Meanwhile, Amazon plans to diversify its position in AI and take on companies like Nvidia by venturing into chip development. CEO Andy Jassy revealed in July that the retail giant had produced two types of AI chips and promises to offer the best price-to-performance in the market.
Then, just a few days ago, Amazon announced it would invest up to $4 billion in OpenAI rival Anthropic. The move underscores the company's aggressive expansion into AI as it seeks to eventually outperform competitors like Microsoft and Alphabet.
Amazon's substantial investment in AI has yet to be reflected in its earnings. In fact, Amazon Web Services actually experienced slowing growth over the last year, with revenue gains hitting 33% in Q2 2022 and falling to 12% in Q2 2023. As a result, it's necessary to have a long-term perspective with Amazon stock.
The company boasts the largest market share in e-commerce and cloud computing, which could provide significant growth in the coming years. Its retail segments are enjoying a steady recovery quarter by quarter, with AWS likely to receive a boost in earnings thanks to AI. Alongside a dip in its stock, it's not too late to invest in Amazon stock and profit from its potentially lucrative future.
