Amazon’s Best Days Could Still Be Yet to Come

Key Points

• Amazon has an impressive past history of growth.

• But when you look at the company’s aspirations, there’s a lot more that Amazon thinks it can do.

• From cloud services to retail and beyond, artificial intelligence is a focal point for CEO Andy Jassy.

• 10 stocks we like better than Amazon ›

It’s easy to think that Amazon‘s (NASDAQ: AMZN) best days must be behind it. The company has grown from the garage of founder Jeff Bezos to become a multi-trillion-dollar enterprise in the span of only 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 technology within its own business, Amazon has built up the expertise to offer groundbreaking tools to clients through its Amazon Web Services (AWS) division, and that business has become a leader in cloud computing.

Yet even though the company has grown so much already, Amazon’s future still looks bright. Recently, CEO Andy Jassy went through all the ideas he has to help foster further expansion for the company. If Jassy can execute well in turning these ideas into popular products and services, then shareholders might look back on the mid-2020s as the time when Amazon truly realized its full potential. In this third and final article on Amazon for the Voyager Portfolio, you’ll learn more about Jassy’s plans and whether they’ll come to fruition.

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Image source: Amazon.

Concentrating on tech

It’s revealing that in discussing avenues for growth, Jassy starts with AWS. Amazon has seen a host of major companies choose AWS for migrating their IT infrastructure into the cloud, touting new agreements with OpenAI along with well-known giants in financial services, transportation, telecommunications, and technology. Perhaps more importantly for the future, more than 500 of the top start-ups in the U.S. are using AWS, and that bodes well for Amazon’s prospects looking years ahead.

To address demand, Amazon is focusing on its own proprietary solutions. Its Graviton custom CPU silicon is more cost-effective than competing products and ensures that Amazon controls its supply chain. To help clients with AI adoption, Amazon has its Bedrock platform to optimize inference models. And with its Trainium line of AI chips, Amazon is squarely taking on Nvidia (NASDAQ: NVDA) and its early lead in dominating the market.

Most of the $200 billion in capital expenditures that Amazon has planned is targeted for AWS. That’s because that’s where so much of the growth is, particularly tied to AI workloads. Jassy is confident that Amazon will be able to keep monetizing this part of the business for a long time.

Keeping consumers happy

Don’t get the impression, though, that Jassy takes Amazon’s e-commerce strength for granted. The CEO pointed to launches of new beauty and fashion brands, while its discount-retail Amazon Hall expanded to over 25 countries. Amazon has become the grocery of choice for over 150 million people in the U.S., combining Whole Foods physical store locations and online shopping options. Tests of AI agents could once again change the shopping experience for Amazon customers in ways that drive more sales.

The Prime service continues to add value. Prime Video has built a huge audience, lifted by NFL football coverage and other live sports. Prime now includes Alexa Plus, with new AI-powered chat capabilities and further integrations with popular consumer products. And in response to greater needs for connectivity, the Amazon LEO low-Earth-orbit satellite communications platform aims to bring the ubiquitous availability of satellite broadband to customers around the world.

Can Amazon stock keep climbing?

Despite all these growth projects in the pipeline, Amazon has faced some resistance from its shareholders. Some investors are balking at the idea that such massive capital expenditures can truly pay off in the long run. Amazon shares have lagged in performance compared to peers.

For those who see Amazon’s AI aspirations as not only realistic but necessary, an underperforming stock is good news. It signals that a future rebound could lift the shares considerably. So although the smaller-company focus of the Voyager Portfolio makes Amazon a poor fit, those seeking to get broad-based exposure to AI stocks might still reasonably consider having it in their portfolios.

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Dan Caplinger has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.