Amazon (AMZN 0.81%) stock lost ground in Thursday's trading. The e-commerce and cloud computing giant's share price closed out the daily session down 2.6%, according to data from S&P Global Market Intelligence.
Amazon stock pulled back today following a report from Bloomberg that TikTok is planning on entering the e-commerce market. Wall Street is showing some concern that an innovative competitor could pressure the reigning online retail giant.
What would competition from TikTok mean for Amazon?
TikTok, which is owned by the Chinese company ByteDance, has a massive and highly engaged global user base -- and it could make waves in industries outside of its core social-media operations. Exactly what tack ByteDance and TikTok might take to enter and expand in the e-commerce market remains to be seen.
Building out a warehousing and distribution network would be difficult and costly. Building infrastructure that could rival Amazon's would be even more challenging. TikTok could accelerate its entry into the market with acquisitions or partnerships, but it's far too early to suggest that it's poised to disrupt Amazon in the category.
Is Amazon stock a buy for 2024?
Even with indications that TikTok could enter the e-commerce market, Amazon still looks like a smart buy for 2024.
While Amazon generates the large majority of its revenue from its e-commerce business, it actually generates the large majority of its profits from its cloud infrastructure business. Amazon Web Services (AWS) is facing increasing competition from companies including Microsoft and Alphabet, but it remains top dog in the cloud market.
Crucially, the space continues to grow and is big enough to support multiple winners, and Amazon is poised to score ongoing wins as the cloud services industry continues to expand. With new artificial intelligence applications being developed, launched, and scaled on the company's cloud infrastructure, AWS stands to enjoy strong demand tailwinds through the next decade and beyond.
Additionally, the company's e-commerce business could benefit from AI trends. With computing breakthroughs opening the door for increased factory and delivery automation, Amazon could see margins for its online retail business improve significantly.
Amazon remains one of the world's best-run companies, and it has an excellent track record when it comes to innovating and fending off competitors. With AI and other potential catalysts creating new growth opportunities, building a long-term position in the stock continues to look like a smart move.
