We recently published a list of Top 10 AI Stocks Investors are Talking About in October. Since Amazon.com Inc (NASDAQ:AMZN) ranks 1st on the list, it deserves a deeper look.
Venu Krishna, Barclays head of U.S. equity strategy, said while talking to CNBC in a latest program that he is not revising his S&P 500 year-end projection of 5,600 because he believes stock valuations are “full.”
“If you see what’s happening, numbers (earnings) have been cut sharply going into the end. What is still anchoring the market is big tech, even though their earnings themselves are kind of decelerating. Then seasonality comes into play. October is the weakest month, and you don’t want to get ahead of that.”
Asked whether he does not believe the market really broadened out, Krishna said while there were some signs of market broadening, the “anchor” of the rally remains big tech, which according to him, are just six stocks.
Moving beyond the earnings and valuations debate, another factor still impacting investor sentiment is the Federal Reserve’s next moves.
Talking about the latest Fed minutes released October 9, Wolfe Research’s Stephanie Roth said on CNBC that a “substantial” majority of Fed officials wanted a 50-basis-point rate cut. However, she said in the next meeting, a 50bps rate cut is “off the table.”
For this article we picked 10 AI stocks trending on latest news. With each stock we 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
Talking to CNBC, Brad Gerstner explained why he is invested in Amazon.com Inc (NASDAQ:AMZN).
“Because we think their retail business their margins are gonna go up. Jassy has absolutely found religion. He’s in animal mode when it comes to making sure they are running as efficiency as possible.”
However, the investor said there is “a lot of worry” when it comes to AWS amid concerns that the company might be at risk of losing market share to Azure. Brad Gerstner said Amazon.com Inc (NASDAQ:AMZN) “has to invest” in Anthropic because MSFT currently has an edge because of its OpenAI investments.
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 Top 10 AI Stocks Investors are Talking About in October. While we acknowledge the potential 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.