Over the past few years, technology companies at the cutting edge of artificial intelligence (AI) have been among the largest economic drivers of the economy, a stark contrast to just 20 years ago. For example, in 2005, energy bellwether ExxonMobil and industrial stalwart General Electric were the two largest publicly traded companies in the U.S., with market caps of $392 billion and $375 billion, respectively. Now tech companies top the charts.
Thus far, only two companies sit above the elusive $4 trillion market cap. AI chipmaker Nvidia currently leads the pack at $5 trillion (as of this writing), and shows no signs of slowing. Apple was recently valued at $4 trillion, driven higher by excitement surrounding iPhone 17 adoption and rumors of an AI-powered Siri in the works.
With a market cap of roughly $2.7 trillion, it might seem premature to suggest that Amazon is destined to join these elite ranks. However, the company has the benefit of multiple growth engines that will ultimately help it join its tech brethren in the $4 trillion club.
Image source: Getty Images.
The power of three
In many ways, Amazon is a company without equal, with three businesses that are tops in their respective industries.
Amazon leads the digital sales space as the world's largest online retailer. While estimates vary, it accounts for 43% of visits to online retailers worldwide and controls more than 40% of the U.S. e-commerce market. Despite its dominance, Amazon's sales continue to grow, with increases of 10% in North America so far this year and 11% in international markets.
Then, of course, there's the company's cloud infrastructure segment, which provides on-demand computing solutions, storage, software applications, AI, and more. Amazon Web Services (AWS) continues to lead the field it pioneered, controlling roughly 30% of the market. What's more impressive is that AWS grew by 20% year over year in the third quarter, its fastest rate of growth in 11 quarters, reaching a run rate of $132 billion. This is by far Amazon's biggest cash cow, responsible for 18% of the company's total revenue and 60% of its profits, helping fuel growth in its other segments.
Finally, there's advertising -- Amazon's smallest, but fastest-growing of its major business segments. What began as a way to capitalize on the valuable digital real estate on its website has spread across the company's growing empire, now encompassing Amazon Prime Video, Fire TV, its live-streaming video game platform Twitch, and its live sports programming. Advertising revenue of $17.7 billion increased 24% year over year in the third quarter, accounting for 10% of Amazon's total revenue, and making it the third-largest digital advertiser.
By far the company's biggest opportunity is AI. Just this week, Amazon made one of its biggest moves yet, signing a $38 billion compute deal with OpenAI. The company has been expanding its data center footprint to meet the accelerating demand for AI, now planning to spend $125 billion on capital expenditures (capex) this year, up 40% compared to the $89 billion it spent in 2024.
NASDAQ: AMZN
Key Data Points
The path to $4 trillion
Amazon has a market cap of roughly $2.74 trillion (as of this writing), so its stock price would need to increase about 47% to reach $4 trillion. According to Wall Street, Amazon is expected to generate revenue of $714 billion in 2025, giving it a forward price-to-sales (P/S) ratio of 3.8. Assuming its P/S remains constant, Amazon would need revenue of roughly $1 trillion annually to support a $4 trillion market cap.
Wall Street is currently predicting Amazon's growth will clock in at roughly 11% annually over the next five years. If the company achieves that benchmark, it could achieve a $4 trillion market cap as soon as 2029. However, given its long track record of performance, I believe that timeline is conservative.
Don't take my word for it. Wedbush analyst Dan Ives made a bold pronouncement this week, maintaining his buy rating on Amazon stock while increasing his price target to a Street-high $340. This represents potential gains for investors of 39% over the coming 12 to 18 months. Ives noted that in the third quarter, AWS reported its strongest year-over-year growth in nearly three years, thanks to the ongoing expansion of its data center footprint and increasing AI capacity. If the analyst's calculations are accurate -- and I believe they are -- the company will be within striking distance of $4 trillion in 2027.
Finally, at 36 times earnings, Amazon trades at a premium compared to a multiple of 32 for the S&P 500. That said, the company has delivered stock price gains of 713% over the past decade, far exceeding the 226% gains of the S&P 500. This makes a strong case that Amazon is a compelling opportunity as it makes its way to $4 trillion.
