Amazon Experienced a Significant 44.4% Surge in Value during 2024
Amazon's shares soared an impressive 44.4% in 2024, as per S&P Global Market Intelligence data. The tech titan, one of the "Magnificent Seven," saw a surge in interest as investors embraced large-cap technology stocks propelled by the artificial intelligence (AI) boom.
Despite entering the year with doubts about its AI capabilities, Amazon swiftly addressed concerns. The company had been viewed as lagging behind Microsoft, which had amped up its own AI efforts with investments in OpenAI, the creator of ChatGPT. Yet, Amazon's strategic moves demonstrated its unwillingness to be left behind.
Amazon's AI Strategy
Amazon kicked off 2024 by launching its Bedrock cloud services in the middle of the year. This move offered developers a multitude of third-party large language models, offering a diverse range of AI tools. Later in 2023, Amazon also invested in OpenAI rival, Anthropic, founded by OpenAI's ex-vice president of research, Dario Amodei. By November 2024, Amazon had invested an additional $4 billion into Anthropic, bringing its total investment to $8 billion.
This collaborative effort between Amazon and Anthropic was significant. Anthropic agreed to rely on AWS as their primary cloud provider and training partner, while also utilizing Amazon's Trainium and Inferentia chips. This partnership validated Anthropic as a formidable competitor in the AI space, while also underlining the effectiveness of Amazon's in-house chips as alternatives to the popular Nvidia GPUs.
Amazon's strategic decision to pour resources into its AI capabilities had tangible financial benefits, as well. AWS revenue growth accelerated 19% in the third quarter, up from 12% a year earlier. Adding to this success, Amazon's e-commerce segment also performed admirably. Both North America and International e-commerce businesses saw steady growth, and the former's operating margin expanded by a full percentage point, while the latter achieved a positive 3.6% margin.
Amazon: A Long-Term Investment
Amazon's resilience throughout multiple bear markets and recessions proves its management's foresight and adaptability. Despite the post-pandemic slowdown, Amazon continues to demonstrate the strength of its leadership and investment strategies.
The valuation may appear high, with Amazon trading at 35 times this year's earnings expectations. Yet, Amazon's persistent prioritization of long-term gains over short-term profits highlights its commitment to rewarding patient investors.
With its dedication to staying at the forefront of technology and delivering long-term returns, Amazon remains an ideal choice for investors looking beyond a five-year horizon.
Investors who believe in long-term gains should consider Amazon as an investment opportunity, given its commitment to staying at the forefront of technology. The company's strategic investments in AI, such as the collaboration with Anthropic and the development of its own chips like Trainium and Inferentia, are likely to yield significant returns.
Amazon's robust financial performance, with AWS revenue growth accelerating and both North America and International e-commerce businesses seeing growth, further strengthens its case as a worthwhile investment in the finance sector.
