We recently compiled a list of the 10 Best Cloud Computing Stocks to Buy Now. In this article, we are going to take a look at where Amazon.com, Inc. (NASDAQ:AMZN) stands against the other cloud computing stocks. You can also check out the 10 Best Artificial Intelligence Stocks to Buy Under $10 here.
Cloud computing has changed the way we access and manage computing resources. The industry is poised for significant growth in the coming years. Market estimates suggest a jump from a size of $0.68 trillion in 2024 to a projected $1.44 trillion by 2029, reflecting a compound annual growth rate (CAGR) of 16.4%. This upward trend is expected to continue, with the market reaching a value of almost $2.5 trillion by 2032. These figures point towards a rising adoption and utilization of cloud solutions across various industries.
The growth in the industry is likely to be driven by a number of factors. One key factor is the growing recognition among large enterprises of the impact that cloud computing can have on their operations. In fact, an impressive 94% of companies across the globe have already adopted cloud computing solutions. This high rate of adoption is expected to have a remarkable economic impact, with forecasts showing that it could generate approximately $3 trillion in revenue by the year 2030.
Currently, North America and Europe are leading the way in cloud computing adoption, with Asia Pacific not far behind. North America holds the largest share of the global market at 41%. The region’s early adoption of technologies like artificial intelligence (AI) and machine learning (ML) has played a key role in driving its cloud market growth.
Even with stricter regulations around data privacy and security, the European markets are also displaying consistent growth in cloud adoption. Countries like Sweden, Finland, the Netherlands, and Denmark are leading the way in cloud adoption within specific industries. This suggests that European businesses are increasingly recognizing the value of cloud solutions while navigating a regulatory landscape that prioritizes data protection.
The Asia Pacific region is also currently experiencing a rise in cloud computing adoption. The market size rose to an estimated $32.5 billion in 2022 and is projected to be a significant contributor to the global cloud computing market in the coming years. This growth can be attributed to a large-scale shift towards digital business models across various industries in the region. The need for cost-effective solutions has fueled cloud adoption among small and medium businesses (SMBs). Approximately 78% of SMBs are currently using cloud services, with 39% of these businesses spending up to $600,000 per year on public cloud services.
Our Methodology
To shortlist the best cloud computing stocks to buy now, we relied on Insider Monkey’s extensive database of 920 hedge funds as of Q1 2024. We picked the cloud computing stocks with the highest 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 Holders: 302
Amazon.com, Inc. (NASDAQ:AMZN), known for its e-commerce dominance, has expanded far beyond online retail. This multinational technology company has a diverse portfolio that includes cloud computing, online advertising, artificial intelligence, and streaming services.
Amazon.com, Inc. (NASDAQ:AMZN) announced a stellar first quarter in 2024, exceeding analyst expectations. Net sales rose 13% year-over-year to $143.3 billion, highlighting strong overall growth. Amazon Web Services (AWS), the company’s cloud computing arm, remained a key driver of this success.
AWS revenue grew an impressive 17% year-over-year, reaching $25 billion. Operating income for AWS also jumped significantly, reaching $9.4 billion compared to $5.1 billion in Q1 2023. Profitability across the entire company improved markedly as well. Operating income grew to $15.3 billion from $4.8 billion in Q1 2023. This strong performance translated to a doubling of net income, reaching $10.4 billion ($0.98 per diluted share) compared to $3.2 billion ($0.31 per diluted share) in Q1 2023.
Analysts are bullish on Amazon.com, Inc. (NASDAQ:AMZN), assigning an average “Strong Buy” rating to the stock. The average 12-month price target for Amazon.com, Inc. (NASDAQ:AMZN) sits at $221.55, suggesting a potential upside of over 11% from the current price levels.
Here’s what Mar Vista Investment Partners, LLC said about Amazon.com, Inc. (NASDAQ:AMZN) in its Q1 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is experiencing a surge in profitability, reflected in significantly higher retail profit margins. Strategic cost reductions in headcount and fulfillment have materialized into financial gains. While the unexpected pandemic-driven demand surge necessitated a rapid expansion of fulfillment infrastructure, this initially impacted operating profits. However, current unit sales growth has effectively reached equilibrium with fulfillment capacity. This balance is leading to positive adjustments to both earnings and intrinsic value estimates. Should the economic climate continue to improve, we believe Amazon’s investment potential aligns with its projected 15-20% intrinsic value growth trajectory.”
Overall AMZN ranks 1st on our list of the best cloud computing stocks to buy. You can visit 10 Best Cloud Computing Stocks to Buy Now to see the other cloud computing stocks that are on hedge funds’ radar. While we acknowledge the potential of AMZN as an investment, 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.