We recently published a list of 10 Trending AI Stocks to Watch for the Rest of 2024. Since Amazon.com Inc (NASDAQ:AMZN) ranks 1st on the list, it deserves a deeper look.
Chris Hyzy, Merrill & Bank of America Private Bank chief investment officer, said while talking to CNBC in a latest program that there is “ a lot of momentum” behind the market rally. The analyst said that to gauge how much momentum we have behind the optimism, we need to analyze the “wedge” in the market.
“The biggest wedge that was in the market last year and in 2022 was inflation. That’s beginning to go away. It’s almost to the fact that no one’s is talking about whether or not we are going to have inflation that’s worrisome.”
Hyzy said that the Fed easing its fiscal policy and now China “joining the party” will be two key tailwinds for the market.
Answering a question about the hard landing vs soft landing debate, the analyst said we should look beyond the two possibilities as he believes there are many other scenarios to consider in between these two outcomes.
“We have a lot of components of a soft landing. I’d like to say it’s more of a mid-cycle slowdown with easier financial conditions that should actually create a profit revision to the upside not downside,” Hyzy added.
For this article we picked top 10 trending AI stocks on the back of latest news and analyst ratings. With each company we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
25 best things to buy on Amazon under $20 (Photo credit: Pixabay)
Amazon.com (NASDAQ:AMZN)
Number of Hedge Fund Investors: 308
Anthropic, the AI startup supported by Amazon.com (NASDAQ:AMZN), is projected to hit $1 billion in revenue this year, according to CNBC. This marks a staggering growth of around 1,000% year-over-year, as reported by Deidre Bosa, who cited an internal document. Notably, third-party API access is expected to contribute 60% to 75% of this total revenue.
Amazon.com (NASDAQ:AMZN) has invested a total of $4 billion in Anthropic, including a $2.75 billion investment made in March. Other backers of the startup include Google and Salesforce.
Cantor Fitzgerlad recently initiated coverage of Amazon.com Inc (NASDAQ:AMZN) with an Overweight rating and said in a broader industry note that despite strong performance, many tech stocks remain attractively valued.
“Despite strong performance over the last 18 months, valuations in internet names are fairly reasonable and should benefit from the expectation for upcoming rate cuts, tempered by decelerating top-line growth and as benefits from widespread cost-cutting fade,” Cantor said.
AWS’s revenue growth accelerated from 17.2% in Q1 to 18.8% in Q2, driven by a shift from on-premises infrastructure to cloud solutions and increasing demand for AI capabilities. Amazon.com Inc (NASDAQ:AMZN) advertising segment added over $2 billion in revenue year-over-year, indicating significant potential in video advertising and opportunities within Prime Video offerings.
Like other tech companies, fears stemming from high CapEX are keeping investors on the sidelines. Amazon.com Inc (NASDAQ:AMZN) spending is expected to rise amid broadband project Project Kuiper and AI growth. Investors are still figuring out whether AI monetization and ROI will come anytime soon. Amazon.com Inc (NASDAQ:AMZN) is also facing a slowdown in consumer spending, especially for higher-ticket items like electronics and computers.
Based on Amazon.com Inc (NASDAQ:AMZN) Q3 guidance, its revenue growth would be 11%. The stock is trading 35x its fiscal 2025 earnings estimates set by Wall Street. This shows the stock is fairly priced and investors looking for strong growth could look elsewhere.
Meridian Hedged Equity Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is a global technology company that operates e-commerce, cloud computing, digital advertising, and other businesses. We own Amazon because we believe it is well-positioned to benefit from several strong secular trends, including the shift to online shopping, the growth of cloud computing, and the increasing importance of digital advertising. The company exceeded expectations in the first quarter, with cloud-computing revenue growth accelerating, driven by easing cost optimization pressures and the ramp of generative AI workloads. The North American retail segment drove record operating margins, highlighting the success of Amazon’s efforts to improve efficiency and lower its cost to serve. International retail also showed promise, as emerging markets steadily progressed towards profitability. Given the strength across these key segments, we continue to hold the position in the company.”
Overall, Amazon.com Inc (NASDAQ:AMZN) ranks 1st on Insider Monkey’s list titled 10 Trending AI Stocks to Watch for the Rest of 2024. While we acknowledge the potential of Amazon.com Inc (NASDAQ:AMZN), our conviction lies in the belief that 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 is originally published at Insider Monkey.
