Even though we're back to a bull market, the S&P 500 has lost some of its year-to-date gains recently. It's up 5% for the year so far, but the Federal Reserve continues to push off its interest rate cuts, signaling that the economy is still facing challenges.
But there's been lots of good news for investors, too. Amazon (AMZN 1.42%) released its 2024 first-quarter results last week, and they packed a punch. All of Amazon's businesses are moving in the right direction, but there was specific focus on what generative artificial intelligence (AI) is bringing to the table right now. Is Amazon the best AI stock to buy right now? Consider what CEO Andy Jassy said on the earnings call.
The AI component
Amazon has used AI for ages in all of its segments, but it's been more of a behind-the-scenes kind of thing. The "old" AI is data analytics and machine learning that helps companies instantly compile data and develop insights that inform their operations. For example, Amazon has troves of data about what its customers buy. If you're looking at a particular vacuum cleaner, it can suggest 10 or 20 more that are similar, and it can even provide side-by-side stats to help you make a decision. That leads to higher conversions, and also more customer satisfaction. This kind of AI is constantly being refined through better technology and more data.
But the "new" AI, the generative type, is what's been creating outsize hype in the markets recently. Generative AI takes the old AI a step further, with so much data and technology that it can begin to be creative, or generate. This burst onto the scene with ChatGPT, which can answer human questions and create essays, poems, and more. And the market has exploded into many different generative AI apps and tools for almost any creative endeavor, with photo creation and manipulation as well as all kinds of textual applications.
NASDAQ: AMZN
Key Data Points
Amazon is using AI in multiple ways, and it's also fully invested in offering the most competitive AI technology for its Amazon Web Services (AWS) clients. Jassy always talks about the three levels of generative AI tools that Amazon offers. The foundation level is made of tools for developers to create their own large language models (LLM) from the ground up. The middle level is semi-custom applications, such as Amazon Bedrock, where clients can use Amazon's LLMs. Finally, Amazon has its own generative AI products that clients can use to improve their businesses.
One new service management recently launched allows third-party sellers to input a URL to their website and the tool creates full product listings. Amazon also just released a product called Amazon Q. Q can take prompts and write code, translate from various code languages, and implement coding changes across operations.
Huge opportunities on the table
Management has often mentioned that it goes through heavy investment periods, where margin isn't the key focus, and then margin expansion periods, where it enjoys the fruits of its investments. It sees enormous potential for what kind of results it can see from investing in AI. This is how Jassy put it: "I don't know if any of us have seen a possibility like this in technology in a really long time, for sure, since the cloud, perhaps since the internet."
That's a mind-blowing statement, considering the kinds of opportunities that Amazon, and most companies, have had in recent years due to technological and digital development.
Even more, these opportunities aren't the only ones Amazon has on the table right now. It's investing in all of its businesses, and it envisions huge results. "We have a lot of growth in front of us," Jassy said, "And that's before the generative AI opportunity."
Is Amazon the best AI stock to invest in right now?
With all of those opportunities, Amazon could be the best AI stock to invest in right now. As large as it is, Amazon could still have decades of more growth ahead. Jassy made sure to point out that all of Amazon's growth is on a larger base, which means even if the growth rates are slower, the dollar growth is incredibly large.
Amazon is investing in speeding up its logistics and delivery times and adding AI all over its business, and advertising brings that all together; Amazon is using AI to create what's possibly the best platform on the internet for advertisers, and it's just getting started with adding that into its streaming business. Advertising was hot in the first quarter, remaining the highest-growing category, up 24% year over year.
Amazon stock is up 18% year to date, and now is a great time to buy in as it climbs further.
