1. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Investors: 302
BMO Capital recently upgraded Amazon shares and the company’s Cloud estimates. The firm expects Amazon Web Services to grow revenue 19% to hit $26.3 billion. BMO increased its price target for AMZN to $230 from $220 and reiterated an Outperform rating on the stock.
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.
Patient Capital Opportunity Equity Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) moved higher throughout the second quarter as AI demand helped to reaccelerate growth in their AWS business. It looks as though the cloud business is finally past the customer cost optimization period with customers restarting their cloud migrations as well as expanding spend on AI projects. Despite the top and bottom-line improvement seen in the first quarter, the company is significantly underearning its long-term potential as it continues to reinvest aggressively in the business. With 80% of global retail sales still being done in physical stores and 85% of global IT spending still on-premises, we see a long-run way for the dominant player in the cloud, retail, and increasingly logistics and advertising space.”
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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