Should Amazon be Purchased, Offloaded, or Maintained as an Investment Option in 2025?
Amazon, represented by the ticker symbol AMZN (2.39%), has consistently delivered outstanding returns over the past decade, skyrocketing over 1,400% and surging a staggering 44% in 2023 alone. This stellar performance is largely due to Amazon's dominance in two high-growth sectors: e-commerce and cloud computing.
Recently, the tech giant has set its sights on artificial intelligence (AI), leveraging this technology to boost operational efficiency and improve customer experiences both for shoppers and sellers. AI tools offered through Amazon Web Services (AWS) have sparked excitement in the stock market, making Amazon one of the standout AI players.
However, as we dive into the early months of 2025, Amazon's stock has remained fairly stable from its January 1st launch. So, what should investors do with their Amazon shares in 2025? Let's delve into the analysis.
A Global E-commerce Giant
Amazon has built a colossal e-commerce empire, boasting over 200 million active Prime subscribers. Prime members enjoy perks such as fast and free shipping and access to an extensive catalog of entertainment offerings, ranging from books to sports and films. The company's high renewal rates, with 97% of U.S. Prime members renewing their memberships within the first three months of 2023, according to Statista, underscore its enduring appeal.
Amazon endured a challenging period when interest rates were at their peak a couple of years ago. However, the corporation seized this opportunity to make strategic adjustments to its cost structure. By cutting jobs and reshaping its fulfillment network, Amazon brought inventory closer to consumers, resulting in substantial savings across transportation and storage costs. This approach enables the e-commerce giant to continuously offer shoppers the most attractive prices while maintaining profit margins.
Moreover, Amazon is harnessing AI to enhance warehouse efficiency through the deployment of robotics. Additionally, conversational AI assistants are enhancing the Amazon shopping experience for both shoppers and sellers.
Although e-commerce may be the first association many have with Amazon, cloud computing is the primary driver of the company's profits. AWS, the leading cloud services provider, offers an extensive range of tools and platforms to cater to users pronouncedly in AI. In fact, AWS's AI offerings propelled the business to a $110 billion annualized revenue run rate in 2024.
Amazon's AI Strategy: Every Layer Counts
AWS's strategy is straightforward: to be ubiquitous in every layer of AI, from supplying customers with fundamental elements like chips to offering a fully tailored, managed service for large language models (LLMs). AWS is also present in AI applications, helping shoppers find products and developers create code.
As the AI revolution continues, AWS's geographically distributed data centers situated at the heart of consumer communities ensure low latency and responsive performance. This approach, designed to capitalize on the emerging wave of agentic AI, will enable Amazon to extract further value from the AI market.
In essence, AWS's capabilities are positioned to capture the enormous growth opportunity presented by the AI market, with the cloud computing market projected to triple by 2032. With this expanding landscape trending toward increasing AI adoption in business processes, the importance of AWS's AI offerings is set to escalate further.
In conclusion, the investment outlook for Amazon in 2025 is promising, given the company's position as a global e-commerce leader, a cloud computing behemoth, and an emerging AI powerhouse. Trading at around 35 times forward earnings, Amazon's stock represents a valuable bargain buy in 2025. More astute investors may view it as an undervalued gem, particularly considering its robust financial performance, market leadership, and ambitious AI strategy.
In light of Amazon's strong financial performance and strategic focus on AI, investors might consider reinvesting in their Amazon shares in 2025. The tech giant's dominance in e-commerce and cloud computing, coupled with its growing presence in AI, presents a compelling investment opportunity. Furthermore, the potential for the cloud computing market to triple by 2032, driven by increasing AI adoption, highlights the long-term potential for Amazon's AI strategy to deliver strong returns for investors.
Given Amazon's successful track record of financial growth and innovation, prudent investors might view Amazon as a solid option for diversifying their portfolios, especially if they have an interest in technology and finance, as it involves aspects of money management and investing in high-growth sectors like AI.
