Megatech stocks have ruled the market for years. Some, however, have outpaced others, and Amazon.com Inc. (NASDAQ: AMZN) is at the top of that list. So far in 2024, its price is up 25%, while the S&P 500 is 10% higher. For comparison, Microsoft Corp. (NASDAQ: MSFT), considered the AI leader, is up 10%. Alphabet Inc. (NASDAQ: GOOGL) is up 20%, but Apple Inc. (NASDAQ: AAPL) is down 9%. Nvidia Corp. (NASDAQ: NVDA) has crushed them all and is up 81%. It has jumped so much because it is considered an AI pure play.
Amazon’s AI credentials are only moderately strong. Management said AI contributed to the success of Amazon Web Services (AWS), the world’s largest cloud company, in the most recent quarter. Yet, much of what management said about AI had to do with Amazon’s future. CEO Andy Jassy commented that generative AI would contribute billions of dollars over the next several years. Investors anxious to buy companies with AI success are impatient.
Amazon still has two engines for unique earnings. While they seem old, they continue to pump out profits. Amazon remains the largest e-commerce company in the world. (There is a debate about whether China’s Alibaba is nearly as large). As brick-and-mortar retail continues to suffer and no huge competitor has emerged, Amazon could hold its e-commerce lead permanently.
Before the dawn of major AI software that companies and individuals could adopt, cloud computing was considered the key to the value of large tech companies. For example, much of Microsoft’s success lies in its Azure group of products, which made Microsoft one of the leaders in cloud computing worldwide.
AWS continues to show why cloud computing is so attractive to Wall Street. In the company’s most recently reported quarter, revenue was $25 billion, up 17% from the same period the year before. Operating profit was $9.4 billion, up 84%, and the operating margin was 38%. (See how much money Amazon makes every minute.)
Amazon’s tech may be old by AI standards, but current results have stayed extraordinary.
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