Amazon.com Inc. was founded in 1994 and has become one of the most diversified e-commerce and cloud computing companies in the world. The company’s business is categorized into three core segments: online retail, physical stores, and Amazon Web Services.
Amazon’s revenue streams include online stores, physical stores, third-party seller services, subscription services, and AWS. Its online retail platform has everything one could imagine: books, electronics, apparel, appliances, and much more.
Over the years, it has diversified its business to multiple physical stores including Whole Foods Market, Amazon Books, and Amazon Go. AWS, its cloud computing business, provides a wide range of services to various businesses, startups, and even government agencies.
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Amazon supplies several consumers through its e-retail and physical stores worldwide. AWS generates revenue from a wide range of customers around the world. Amazon’s subscription services such as Amazon Prime target consumers who seek convenience and special privileges while using Amazon’s services.
While all the above business segments make Amazon a successful business, its bullish thesis lies in its ventures in AI. The company recently acquired Anthropic, a direct competitor of OpenAI, for $4 billion. It already offers its Amazon Bedrock platform to users, giving them access to foundation models which they can build their AI applications on. Bedrock users can now access Anthropic, making it an even more attractive proposition. This should attract more users to the company’s platform, giving it a larger user base that it can potentially monetize in the future.
Amazon already has a massive headstart in AI since it commands a decent market share in the cloud computing market through Amazon Web Services (AWS). By utilizing the AWS resources, Amazon can leverage Anthropic’s capabilities to become a major player in AI, if not the leading player.
This partnership with Anthropic is still in the early stages and if the partnership takes off, it could result in manifold returns for the company. That $4 billion acquisition price tag will dwarf in comparison to the revenue Amazon can generate with generative AI. This positions Amazon as a leading contender to benefit from AI growth while offering the safety of a stable and strong business, making it a favorite of hedge funds.
Amazon ranks 1st on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 308 hedge fund portfolios held AMZN at the end of the second quarter which was 302 in the previous quarter. While we acknowledge the potential of AMZN as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
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