2 Reasons to Buy Amazon Stock Like There's No Tomorrow

In a market filled with highly speculative stocks, it's easy to overlook established giants. However, ignoring prominent leaders like Amazon (AMZN) might not be wise. Amazon is uniquely situated to capitalize on two substantial growth opportunities.

Investing in Amazon now could enable you to tap into the expanding fields of artificial intelligence (AI), cloud computing, and digital advertising seamlessly.

1. The Immense Potential of AI Cloud Computing

The first compelling reason to consider buying Amazon shares is the significant opportunity presented by AI. Amazon's notable investments, including an additional $4 billion in AI startup Anthropic, illustrate this potential.

As of November 22, Amazon’s total investment in Anthropic reached $8 billion, positioning the company as Anthropic's primary cloud provider and training partner. This strategic alliance helps Amazon remain at the forefront of AI cloud computing by integrating Anthropic's capabilities into Amazon Web Services (AWS).

In comparison, its rival Microsoft has invested over $13 billion in OpenAI, setting the stage for a fierce competition in the AI risk. Meanwhile, AWS is already showing promise, with a 19% growth in sales, totaling $27.5 billion in the third quarter. According to Amazon's CFO Brian Olsavsky, customers recognize that leveraging generative AI requires a move to the cloud.

According to estimates from Goldman Sachs, the global AI cloud computing market could reach around $2 trillion by 2030. With a commanding 31% market share in cloud computing, Amazon is well-positioned to benefit from any future surge in AI cloud sales.

2. Growth in Amazon's Advertising Sector

Though it may not be the first thought when considering Amazon, the company’s advertising business is rapidly expanding and deserves attention. In the third quarter, advertising sales increased by 19%, reaching an impressive $14.3 billion. To put that in perspective, this is $1.7 billion more than Amazon's total ad sales from five years ago.

Currently, Amazon commands a 13.9% share of the U.S. digital advertising market, and forecasts suggest this will grow to 17.3% by 2026, as per eMarketer. By the end of 2026, Amazon’s advertising sales could rise to an estimated $94.5 billion, potentially more than doubling the total from 2023.

Moreover, digital advertising is expected to dominate U.S. ad spending, with a projected 84% share by 2030, according to Statista. Given Amazon's dominance in e-commerce and its growing portfolio of digital video content, including Prime Video and live-streamed sports, the company is positioned to further enhance its ad sales.

Amazon's Valuation Perspective

While Amazon stock isn’t exactly a steal at this moment, it might not be as pricey as it appears. The current forward price-to-earnings ratio for Amazon is 33.4, which is a moderate premium compared to the S&P 500's forward P/E ratio of 27.8.

With its prominent role in the AI cloud computing arena and its expanding advertising opportunities, now could be a great time to consider adding Amazon shares to your investment portfolio.

Amazon, AI, Advertising