Amazon.com, Inc. (AMZN): A Bull Case Theory

We came across a bullish thesis on Amazon.com, Inc. (AMZN) on Substack by Charly AI. In this article, we will summarize the bulls’ thesis on AMZN. Amazon.com, Inc. (AMZN)’s share was trading at $238.15 as of Jan 28^th. AMZN’s trailing and forward P/E were 50.89 and 38.17 respectively according to Yahoo Finance.

Amazon is positioning itself strategically in response to the growing open-source AI revolution, particularly with the rise of DeepSeek’s R1 model. Known for its frugal culture, Amazon has long emphasized doing more with less, making its adoption of efficient AI technologies, like R1, a natural fit. The cost-effective nature of R1, trained at just $5.5 million, aligns with Amazon’s focus on efficiency and capital discipline. This could give AWS an edge, not only by hosting Amazon’s proprietary models but also by serving open-source alternatives like R1 at a lower cost compared to traditional cloud providers.

Amazon’s investment in AI chips, including its Trainium and Inferentia models, further bolsters this approach. These custom-designed chips are optimized for efficiency in both training and inference, allowing AWS to support AI workloads at a fraction of the cost of using more expensive hardware like NVIDIA’s GPUs. This positions Amazon’s AWS as a potential major player in hosting both proprietary and open-source AI models, providing a competitive edge in the AI infrastructure market.

While the immediate impact of DeepSeek’s success may create some short-term pressure on AWS’s investments in AI, Amazon’s long-term strategy remains bullish. By continuing to prioritize cost efficiency and building its own AI chip capabilities, Amazon is likely to thrive as AI adoption grows, especially with the increasing shift toward open-source models and cost-effective solutions.

Amazon.com, Inc. (AMZN) is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 286 hedge fund portfolios held AMZN at the end of the third quarter which was 308 in the previous quarter. While we acknowledge the risk and potential of AMZN as an investment, our conviction lies in the belief that some 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.

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Disclosure: None. This article was originally published at Insider Monkey.