1. Amazon.com Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 286
Amazon.com Inc. (NASDAQ:AMZN) is a retail and cloud computing giant that offers a vast selection of products through its online and physical stores. It’s also a leader in cloud services through its Amazon Web Services (AWS) platform and develops its own line of devices like Kindle and Echo.
Cantor Fitzgerald analyst Deepak Mathivanan raised the stock’s price target from $240 to $270 while maintaining an Overweight rating. He anticipates a positive outlook for internet stocks in 2025, with growth in areas like digital advertising, online shopping, and mobility. He emphasized the accelerating pace of advancements in AI, robotics, and other technologies. Amazon.com Inc. (NASDAQ:AMZN) was a top pick due to its strong position in AI development.
At CES 2025, Amazon Ads unveiled an AI-powered SQL generator, which streamlines audience creation within its Marketing Cloud. This tool allows advertisers to define their target audience using natural language, which reduces query development time. Amazon Ads continues to use AI and ML to drive growth. The company has introduced tools like a GenAI-powered video generator, which enables advertisers to create compelling video ads using a single product image. These AI tools should drive advertiser growth and improve ROI for Amazon Ads.
Alphyn Capital Management recently highlighted that strong execution, efficiency gains, and AI investment are driving revenue growth and profitability for Amazon.com, Inc. (NASDAQ:AMZN). It stated the following regarding the company in its Q4 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) continues to demonstrate how a massive balance sheet, combined with a relentless focus on customer satisfaction and first-principles thinking, can drive sustainable cash flow growth. Recent earnings highlight strong execution across multiple fronts. At its core, Amazon pursues what customers value most: faster, cheaper delivery. This quarter, 40 million users enjoyed free same-day shipping, reflecting management’s sizable investments in regional logistics. These moves have reduced service costs, supported margin expansion, and set the stage for continued improvements with further robotics integration.
Amazon has now achieved margin gains in its international operations, making that segment profitable. By emphasizing improvements on the “intake” side of the supply chain and leveraging regional logistics, the company is laying the groundwork for more efficiencies ahead. Meanwhile, Amazon’s advertising business saw $14.3 billion in revenue, up 19% year-over-year, a clear example of the company’s success in forging new, high-margin revenue streams. Amazon Web Services and AI-related offerings also grew 19%, pushing quarterly revenues near $30 billion. Management spent $75 billion in capex this year, mainly for AI infrastructure, which will increase to $90 billion next year. While those numbers look daunting, I have confidence in the company’s ability to balance aggressive growth with disciplined returns, given Amazon’s decades-long track record of smart capital allocation. Amazon has a ruthless focus on “what works,” for example, while shutting down its project (with JP Morgan and Berkshire) to change healthcare service proved too complex, it pivoted to high-velocity pharmacy deliveries, leveraging its logistics expertise.
Of course, AI is all the rage right now, and we will eventually find out how much of this is hype. For now, Amazon’s AI initiatives are already producing multibillion-dollar revenues and growing at triple the rate of AWS when it was at a similar stage.”
While we acknowledge the growth potential of Amazon.com Inc. (NASDAQ:AMZN), our conviction lies in the belief that AI stocks hold great promise for delivering high 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.
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