1. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Investors: 302
Jim Cramer thinks Amazon.com Inc (NASDAQ:AMZN) could benefit from a Trump presidency amid regulatory factors. The CNBC host said Amazon has been in the “crosshairs” with the FTC.
Amazon.com Inc (NASDAQ:AMZN) continues to gain on the back of its AWS business which is set to benefit from the rise in AI spending. Mizuho recently cited a survey conducted by one of its partners which shows that AWS sales cycle is seeing acceleration. Mizuho analyst James Lee reiterated his Outperform rating on the stock and gave a $240 price target. The survey shows that spending on AWS is expected to rise about 22% year over year in 2024, up from the previous estimate of 20%, as generative AI projects are seen at an “inflection point” with external models about six months away from commercial deployment.
Amazon.com Inc (NASDAQ:AMZN) is one of the stocks Dan Ives of Wedbush thinks have the potential to grow based on the AI revolution.
Investment firm UBS in a latest report named Trainium and Inferentia as Amazon.com Inc’s (NASDAQ:AMZN) strengths in the AI Enabling layer to profit from the $1.16 trillion opportunity. Trainium is a machine learning (ML) chip that AWS purpose-built for deep learning (DL) training of 100B+ parameter models. Inferentia is an AI accelerator for deep learning (DL) and generative AI inference applications.
Amazon Web Services is another major factor that makes Amazon.com Inc (NASDAQ:AMZN) well positioned in the Enabling layer of the AI value chain. However, UBS believes Amazon.com Inc (NASDAQ:AMZN) doesn’t have any offering in the Intelligence layer of the AI value chain. The firm labeled “chatbot recommendations” as Amazon.com Inc’s (NASDAQ:AMZN) strength in the application layer of AI.
Amazon.com Inc (NASDAQ:AMZN) is becoming an AI power house thanks to its AWS business, which saw operating margins cross 37% during the first quarter. AWS operating margins have now came in more than 30% for the past five straight quarters. Amazon.com Inc’s (NASDAQ:AMZN) revenue in the first quarter jumped 12.5% YoY and its adjusted EPS more than tripled. Revenue in North America and International segments grew as well. Analysts believe digital ads is another strong revenue stream for Amazon.com Inc (NASDAQ:AMZN), with revenue from the segment increasing 24% YoY to $11.8 billion in the first quarter.
ClearBridge Sustainability Leaders Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) operates the world’s leading e-commerce marketplace and the largest public cloud platform and has a burgeoning advertising business. We expect to see sustained margin improvement as Amazon’s retail regionalization efforts are bearing fruit and as its advertising business continues to scale ahead of peers. We believe the profitability ramp is still in the early innings as the company turns its attention to improving costs. One area will be inbound shipping, where faster delivery times through reduced freight, miles and packaging can reduce waste. We also see generative AI tailwinds and infrastructure modernization driving re-acceleration in growth at AWS, further enhancing Amazon’s free cash flow compounding potential. In addition, following our early 2024 ESG engagements with Amazon (after multiyear engagements) we were positively inclined to see continued improvements in labor relations (health and safety metrics, benefits and wages), as well as in environmental stewardship (climate targets, reducing packaging materials, electric delivery trucks) and innovation (commitments to responsible AI and data privacy). One of the newly announced initiatives on the retail side is consolidating deliveries into fewer boxes, which reduces packaging.”
While we acknowledge the potential of Amazon.com Inc (NASDAQ:AMZN), our conviction lies in the belief that under the radar 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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