1. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Investors: 302
Amazon.com Inc (NASDAQ:AMZN) continues to gain on the back of its AWS business which is set to benefit from the rise in AI spending. Mizuho recently cited a survey conducted by one of its partners which shows that AWS sales cycle is seeing acceleration. Mizuho analyst James Lee reiterated his Outperform rating on the stock and gave a $240 price target. The survey shows that spending on AWS is expected to rise about 22% year over year in 2024, up from the previous estimate of 20%, as generative AI projects are seen at an “inflection point” with external models about six months away from commercial deployment.
Amazon.com Inc (NASDAQ:AMZN) is one of the stocks Dan Ives of Wedbush thinks have the potential to grow based on the AI revolution.
Investment firm UBS in a latest report named Trainium and Inferentia as Amazon.com Inc’s (NASDAQ:AMZN) strengths in the AI Enabling layer to profit from the $1.16 trillion opportunity. Trainium is a machine learning (ML) chip that AWS purpose-built for deep learning (DL) training of 100B+ parameter models. Inferentia is an AI accelerator for deep learning (DL) and generative AI inference applications.
Amazon Web Services is another major factor that makes Amazon.com Inc (NASDAQ:AMZN) well positioned in the Enabling layer of the AI value chain. However, UBS believes Amazon.com Inc (NASDAQ:AMZN) doesn’t have any offering in the Intelligence layer of the AI value chain. The firm labeled “chatbot recommendations” as Amazon.com Inc’s (NASDAQ:AMZN) strength in the application layer of AI.
Amazon.com Inc (NASDAQ:AMZN) is becoming an AI power house thanks to its AWS business, which saw operating margins cross 37% during the first quarter. AWS operating margins have now come in more than 30% for the past five straight quarters. Amazon.com Inc’s (NASDAQ:AMZN) revenue in the first quarter jumped 12.5% YoY and its adjusted EPS more than tripled. Revenue in North America and International segments grew as well. Analysts believe digital ads is another strong revenue stream for Amazon.com Inc (NASDAQ:AMZN), with revenue from the segment increasing 24% YoY to $11.8 billion in the first quarter.
Amazon.com Inc (NASDAQ:AMZN) is the fourth-biggest holding of KraneShares Artificial Intelligence and Technology ETF (AGIX).
Polen Focus Growth Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) reported better-than-expected results in the quarter, notably showing a re-acceleration in revenue growth in its Amazon Web Services (AWS) segment for the first time in several quarters. Equally impressive, the AWS segment saw margins increase significantly compared to the prior quarter and year, as it’s growing into a more structurally profitable business. In addition, Amazon’s profit margin is expanding rapidly as its e-commerce business has been re-aligned to produce real profits. Meanwhile, the ongoing mix shift to faster-growing and higher-margin businesses, like AWS and Advertising, are contributing more to the company’s bottom line.
We trimmed our position in Amazon purely as a function of risk management, limiting the position size from growing beyond a 15% weighting. Our ongoing analysis underpins our optimism for the business, its competitive advantages, growth runway, management team, and valuation relative to its long-term growth prospects, hence why it remains our largest position.”
While we acknowledge the potential of Amazon.com Inc (NASDAQ:AMZN), our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also look at the 10 Best Industrial Stocks to Buy According to Hedge Funds and the 10 Best NASDAQ Penny Stocks To Invest In.
