We recently published a list of 10 Trending AI Stocks to Watch in September. Since Amazon.com Inc (NASDAQ:AMZN) ranks 1st on the list, it deserves a deeper look.
Sam Stovall, chief investment strategist at CFRA Research, said while talking to CNBC in a latest program that since 1990, the market on average gains about 18% between the last rate hike and the first rate cut. However, during the 30 days after the first rate cut, the market historically “tread water,” gaining less than “one half of one percent.”
“Most of the action is below surface however, in the sectors, areas where a lot of the leaders be in the defensive areas but I have to add technology in there because investors don’t want to be giving up on the growth,” Stovall said.
Stovall pointed to another important historical data point regarding election years. He said that usually August and September are slow months in the stock market, but during election years the trend shifts to September and October, with markets historically rebounding in November and December once the uncertainty around the election subsides. The analyst recommended investors to position for a post-election rally which he believes buoys growth stocks.
For this article, we chose the top 10 AI stocks currently on investors’ radar following important news, earnings and analyst ratings. With each stock, 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).
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Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Investors: 308
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.
Ithaka US Growth Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Founded in 1994, Amazon.com, Inc. (NASDAQ:AMZN) has evolved from its early roots as an online bookstore to become one of the world’s largest eCommerce retailers. At the end of 2023 Amazon stood poised to capture ~40% of all US e-commerce sales, representing five times more share than the next closest competitor. In addition to eCommerce, Amazon Web Services (“AWS”) has become the market leader in outsourced cloud infrastructure. Further, Amazon Advertising is garnering significant share in digital advertising, particularly product placement ads, thanks to consumers beginning their product searches on Amazon’s site. Amazon’s stock appreciated on the back of stabilization of the company’s cloud computing segment and increased confidence management would be able to contain expenses and push operating margins above prior peaks in the near-to-medium term.”
Overall, Amazon.com Inc (NASDAQ:AMZN) ranks 1st on Insider Monkey’s list titled 10 Trending AI Stocks to Watch in September. 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.
