1) Amazon.com, Inc. (NASDAQ:AMZN)
10-Year Revenue Growth: ~21.7%
Number of Hedge Fund Holders: 338
Amazon.com, Inc. (NASDAQ:AMZN) remains a critical player in the technology sector as its core businesses, such as cloud computing, consumer electronics, and AI-driven e-commerce, are aided by advanced technology and data analytics. The company’s revenues are well-placed for a huge bounce due to its investment in GenAI, as per analyst John Blackledge of TD Cowen. The analyst further added that GenAI business Anthropic, known for the Claude AI service, is expected to play a critical role in Amazon.com, Inc. (NASDAQ:AMZN)’s future growth.
The company’s investments in AI can result in significant synergies throughout its various business segments. For AWS, advanced AI capabilities might bring more enterprise customers and fuel higher-margin services, strengthening Amazon.com, Inc. (NASDAQ:AMZN)’s position as a leader in cloud computing. Anthropic and AWS have joined hands to provide AWS customers early access to the ability to do fine-tuning with their own data on Anthropic models, a customization benefit that AWS customers will enjoy for each model for a period of time on new Claude models. Therefore, growth in the broader technology industry is expected to drive Amazon.com, Inc. (NASDAQ:AMZN)’s expansion by fueling demand for AWS cloud services, automation, and AI.
Fred Alger Management, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Amazon.com, Inc. (NASDAQ:AMZN) is a renowned online retailer and leader in cloud computing. The company’s Amazon Web Services (AWS) division offers utility-scale cloud solutions that support corporate America’s digital transition. During the quarter, Amazon’s shares contributed to performance as the company reported better-than-expected fiscal third-quarter results, with revenues and earnings beating analyst estimates. Operating margins expanded to 11%, driven by efficiency gains in logistics and robust AWS performance. Notably, AWS revenue growth accelerated during the quarter, along with recording its highest-ever operating margin of 38.1%, driven by easing cloud cost optimizations, renewed workload migrations, and an increasing contribution from AI workloads. On their earnings call, management highlighted plans to increase capital expenditures to enhance their technology infrastructure, catering to the surging demand for AI-driven computing.”
While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued 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.
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