We recently compiled a list of the 8 Best FAANG Stocks to Buy According to Analysts. In this article, we are going to take a look at where Amazon.com, Inc. (NASDAQ:AMZN) stands against the other FAANG stocks according to analysts.
“We Are Just at the Beginning of the AI Buildout”
Each of the big tech stocks has revealed its plans to invest $50 to $100 billion in GPU compute, evidence that Artificial intelligence may be the biggest theme right now. On October 21, Ray Wang, Constellation Research’s principal analyst, founder, and chairman, joined CNBC’s ‘Squawk Box’ to share his stance on the tech sector, especially the Magnificent Seven, and the role of artificial intelligence.
The third quarter earnings season is upon us some of the mag seven are yet to report their quarterly results. Wang suggests artificial intelligence is just beginning to pan out and will stand as the major theme for a long while. He adds that companies, among the mega-caps, have poured hundreds of billions into AI during the first half of the year, and plan to add more during the second. He also shared that these mega-cap companies are driving demand as well.
READ ALSO: Jim Cramer’s Game Plan: 23 Stocks to Watch and 10 AI Stocks to Watch for the Rest of 2024.
While these expenditures may seem to have little to no payoff, historically investors were also worried about companies investing in the Internet. However, Wang dissects that the internet is not the same as artificial intelligence. The internet was rather open and decentralized and had many winners. AI, on the other hand, is more centralized, closed, and expensive, meaning that only a few players are going to make a mark.
Wang also shares that he owns all of the magnificent seven stocks. An interesting conjunction, highlighted by Wang, is that across search, social media, and commerce, most of the stocks in the Mag 7 have digital ads. Across all these three avenues, the next players cannot compete with the Magnificent Seven, especially in terms of revenue. On the regulatory front, he emphasized that the sector needs some relief. He adds that the tech sector needs to play out mergers and currently IPOs are lined up, explaining why everything is on hold.
FAANG is an acronym, which originally began as FANG, consisting of five major technology companies. The original term, FANG was coined by Jim Cramer in 2013 because, according to him, the four tech stocks belonged together as they functioned across similar themes of digitization and the web. FAANG today is much broader and includes technology companies that are shaping the future, which may also be categorized as the magnificent seven. That said, let’s take a look at the 8 best FAANG stocks to buy according to analysts.
Our Methodology
To come up with the 8 best FAANG stocks to buy according to analysts, we went over the NYSE FANG+ index and picked the latest holdings. We then examined the stocks and picked the ones with the highest analyst upside potential as of October 22, 2024. We also added the hedge fund sentiment of each stock as of Q2 2024. The list is in ascending order of analyst upside primarily and hedge fund holders, as of Q2 2024, secondarily.
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).
Photo by Bryan Angelo on Unsplash
Amazon.com, Inc. (NASDAQ:AMZN)
Analyst Upside as of October 22, 2024: 15.9%
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) ranks third on our list of the best FAANG stocks to buy according to analysts. The technology company is an e-commerce giant that also provides streaming and data cloud services.
Amazon.com’s (NASDAQ:AMZN) growth trajectory is exceptional. On August 2, Nick Jones, Citizens JMP equity research analyst, joined Yahoo Finance to discuss his case for AMZN. He shares that AWS has outperformed market expectations, despite the total revenue falling short of its guidance in Q3. Jones adds that AMZN is yet to explore a multitude of opportunities to expand globally, and while he acknowledges that AMZN is massive, he states it is still in growth mode.
The company has been achieving milestone after milestone. Amazon.com, Inc. (NASDAQ:AMZN) has not only been actively involved in the development of AI hardware and software but has also signed partnerships with the government and AI startups. To stay on track with innovation, on October 11, the company launched its first autonomous robot, Proteus, that can complete miscellaneous tasks in the Amazon fulfillment centers independently and safely.
Similarly, in a recent development, on October 16, Amazon.com, Inc. (NASDAQ:AMZN) announced its plans to invest in nuclear energy to meet the power demand from AI data centers. Amazon Web Services, AWS, signed a partnership with Dominion Energy and X-Energy to develop small modular reactors in Virginia. The deal was closed shortly after MSFT and GOOGL announced similar plans to invest in nuclear energy projects. The total investment in nuclear energy amounts to nearly $500 million.
Amazon.com, Inc. (NASDAQ:AMZN) has significant growth potential and to achieve such the company is working tirelessly. Over the next few years, the company is not only poised to become a fully functional AI company but it is also on track to become carbon-free.
Diamond Hill Select Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Among our top individual contributors in Q2 were Amazon.com, Inc. (NASDAQ:AMZN), Texas Instruments and Mr. Cooper Group. Internet retail and cloud infrastructure company Amazon is benefiting from strong profitability, particularly in its Amazon Web Services (AWS) business. Shares also received a boost amid growing optimism around the demand for AWS as Amazon customers’ investments in generative AI projects continue growing.”
Overall AMZN ranks 3rd among the 8 best FAANG stocks to buy according to analysts. 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 time frame. 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.