It is easy to think that Amazon‘s (NASDAQ:AMZN) The best days must be behind us. The company grew from founder Jeff Bezos’ garage to a multi-million-dollar company in just 30 years. It has become the leading force in e-commerce, forcing the entire retail industry to pivot and embrace online distribution and home delivery. And because it has embraced the technology within its own business, Amazon has developed the expertise to offer innovative tools to customers through its Amazon Web Services (AWS) division, and that business has become a leader in cloud computing.
However, even though the company has already grown a lot, Amazon’s future still looks bright. Recently, CEO Andy Jassy discussed all the ideas he has to help foster further expansion of the company. If Jassy can execute well on turning these ideas into popular products and services, then shareholders might look back on the mid-2020s as the time when Amazon truly reached its full potential. In this third and final article on Amazon for the Voyager PortfolioYou will learn more about Jassy’s plans and whether they will come true.
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It’s telling that when looking at avenues for growth, Jassy starts with AWS. Amazon has seen a host of major companies choose AWS to migrate their IT infrastructure to the cloud, touting new deals with OpenAI alongside well-known giants in financial services, transportation, telecommunications, and technology. Perhaps most importantly for the future, more than 500 of the top US startups are using AWS, and that bodes well for Amazon’s prospects in the years to come.
To address the demand, Amazon is focusing on its own proprietary solutions. Its custom Graviton CPU silicon is more cost-effective than competing products and ensures Amazon controls its supply chain. To help customers with AI adoption, Amazon has its Bedrock platform to optimize inference models. And with its Trainium line of AI chips, Amazon is fully taking on NVIDIA (NASDAQ: NVDA) and its initial leadership in market dominance.
Most of the $200 billion in capital spending Amazon has planned is earmarked for AWS. This is because that is where much of the growth is, particularly tied to AI workloads. Jassy is confident that Amazon will be able to continue monetizing this part of the business for a long time.
However, don’t give the impression that Jassy takes Amazon’s e-commerce strength for granted. The CEO highlighted the launches of new beauty and fashion brands, while its Amazon Hall of discount stores expanded to more than 25 countries. Amazon has become the preferred supermarket for more than 150 million people in the U.S., combining Whole Foods brick-and-mortar locations and online shopping options. Testing AI agents could once again change the shopping experience for Amazon customers in ways that lead to more sales.
The Prime service continues to add value. Prime Video has built a large audience, driven by coverage of NFL football and other live sports. Prime now includes Alexa Plus, with new AI-powered chat capabilities and greater integrations with popular consumer products. And in response to increased connectivity needs, the Amazon LEO low-Earth orbit satellite communications platform aims to bring ubiquitous satellite broadband availability to customers around the world.
Despite all of these growth projects in the pipeline, Amazon has faced some resistance from its shareholders. Some investors balk at the idea that such massive capital expenditures could really pay off in the long term. Amazon stock has been a lagging performer compared to its peers.
For those who see Amazon’s AI aspirations as not only realistic but necessary, an underperforming stock is good news. He notes that a future rally could boost the stock considerably. So while the strategy’s focus on smaller companies Voyager Portfolio makes Amazon a poor fit, those looking to gain broad exposure to AI stocks could still reasonably consider holding them in their portfolios.
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Dan Caplinger has positions at Amazon and Nvidia. The Motley Fool has positions and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.
Amazon’s best days could still be ahead was originally published by The Motley Fool
