The latest advances in artificial intelligence (AI) have had a huge impact on the technology industry, creating a new generation of billionaires in the process. According to many experts, the ability of these advanced algorithms to create new content, streamline processes, and improve productivity will usher in the Fourth Industrial Revolution.
Apple, Nvidia, and Microsoft are three of the most valuable companies in the world, with market capitalizations exceeding $3 trillion. What this tenacious trio have in common is that they are all on the cutting edge of AI. It is no leap to suggest that future members of the $3 trillion club will gain admission to this elite fraternity by leveraging AI.
One of the companies leading the way in AI research and implementation is Amazon. (NASDAQ:AMZN). The company is well-positioned to benefit from its foray into AI, which will ultimately help it secure membership in the $3 trillion club by 2027. Let’s take a look at how AI can fuel the company’s rise.
Amazon has a long history of implementing sophisticated algorithms to improve processes and make business more efficient. But the company is leveraging advances in generative AI to take it to the next level.
For example, Amazon’s advances in AI-powered robotics “simplify the loading, picking, packing, and shipping process,” said CEO Andy Jassy. As a result, fulfillment processing times have been reduced by up to 25%. Fulfillment costs accounted for more than 10% of Amazon’s total operating expenses last year, so even small improvements in efficiency can have a big impact on revenue. The company continues to automate its fulfillment network, which will ultimately lead to increased profits.
One of the keys to Amazon’s continued success is getting the right products in front of the right consumers at the right time. The company has been employing algorithms to improve the relevance of its product recommendations for years, but Amazon is taking it to the next level with advances in AI. Additionally, the company introduced Rufus, an AI-powered generative shopping assistant, across all major markets to help shoppers find what they want, thereby increasing sales.
The company has been hard at work developing a suite of AI-powered generation tools to curate display, video, and audio ads to help third-party sellers succeed. For example, the company’s video generator can use a single product image to “curate a customer’s AI-generated video.” More than 60% of Amazon’s sales come from third-party sellers, so helping sellers succeed helps Amazon succeed, too.
The most obvious way for the company to benefit from advances in generative AI is by hosting its AI capabilities in the cloud. One of the biggest obstacles to AI adoption is the lack of access to the data needed to create generative AI models. Training large-scale language models (LLMs) that power AI requires at least 1 billion data points. This means that only companies like Amazon with access to large amounts of data can create top-of-the-line AI models.
Amazon Web Services (AWS) is the world’s largest cloud infrastructure service and continues to bring AI capabilities to cloud customers at scale. Jassy said, “Over the past 18 months, AWS has released nearly twice as many machine learning and generative AI capabilities as all other major cloud providers combined” (emphasis mine). .
Additionally, the company offers one of the largest repositories of widely used AI models available on the Amazon Bedrock platform. These include AI21 Labs, Anthropic, Cohere, Meta Platforms, Mistal AI, Stability AI, and of course Amazon’s LLM for homegrown AI models.
Finally, for price-conscious cloud customers, Amazon has developed its own custom AI chips (Trainium and Inferentia). This allows customers on a budget to enjoy the benefits of AI.
Its wide range of services will no doubt persuade many customers to join the AI revolution, benefiting Amazon in the process. AWS has generated 17% of Amazon’s revenue and 62% of its operating profit so far this year. The company is driving the growth of its largest revenue stream by offering the largest selection of AI products.
These are just a few examples, among others, of the many ways Amazon is using AI to dramatically improve outcomes and take its business to the next level. These efforts will help secure membership in the $3 trillion club.
Amazon’s market capitalization is currently approximately $2.39 trillion (as of this writing). This means that it would take about a 25% share price increase to push its value to $3 trillion. Wall Street expects Amazon to generate $638 billion in revenue in 2024, at a price-to-sales (P/S) ratio of approximately 3.4 times. Assuming a constant P/S, Amazon would need to increase its sales to about $799 billion annually to support its $3 trillion market cap.
Wall Street currently expects Amazon’s sales to grow 11% annually over the next five years. If the company can achieve this growth rate, it could reach a market capitalization of $3 trillion as early as 2027. It’s worth noting that Amazon has increased its annual revenue by about 442% over the past decade, so Wall Street’s forecasts may be conservative.
Additionally, Amazon’s forward revenue is approximately 3.4x, a bargain compared to Nvidia and Apple, which have 17x and 8x, respectively.
That’s an attractive price for companies, which have many ways to benefit from accelerated AI adoption.
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Danny Vena has held positions at Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
Meet the supercharged artificial intelligence (AI) growth stocks that could join Apple, Nvidia, and Microsoft in the $3 trillion club by 2027 (Original article: The Motley Fool)
