Friday, April 12, 2024

The Artificial Intelligence Stock Everyone Should Buy and Hold Forever

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This AI-powered stock can deliver robust returns for long-term investors. Artificial intelligence (AI) has emerged as a transformative force in the modern economy and is rapidly revolutionizing industries and businesses across the world. Not surprisingly, AI has also become a highly lucrative investment theme and has captivated the minds of both seasoned investors and newbies alike. With several market intelligence firms expecting the AI market to be worth at least $1 trillion by 2030, the relevance of this investment theme will also increase in the coming years.

Amazon (NASDAQ: AMZN) is one of the companies benefiting significantly from this trend. This global leader in cloud computing has extensive AI capabilities, including product discovery and inventory forecasting algorithms for its huge e-commerce business and its Bedrock service for enabling its cloud computing customers to build generative AI applications.

Under Amazon Web Services (AWS), the company continues to dominate the global cloud infrastructure space, with 31% market share. Generative AI is expected to emerge as a major growth catalyst for AWS, with multiple clients such as Salesforce, BMW Group, Nvidia, Hyundai Motor, Merck, and Amgen already securing agreements with the company in 2023. AWS is also leveraging machine learning algorithms and custom AI chips for training large language models, further solidifying its position in the market.

Amazon’s AI-powered initiatives are not limited to cloud computing. The company’s retail business has seen significant improvements through its focus on customer experience, operational efficiency, and strategic investments in AI technologies. By leveraging predictive analytics, machine learning algorithms, and generative AI applications like Rufus, Amazon has successfully enhanced product discovery, personalized the shopping experience, and reported the fastest-ever Prime delivery speed in 2023.

In addition, Amazon’s advertising business is proving to be a significant revenue generator, with a 26% year-over-year growth in the fourth quarter of fiscal 2023. The company is using machine learning algorithms to deliver relevant and personalized advertisements to customers, while also focusing on sponsored TV advertising in the U.S.

Despite its impressive growth and market dominance, Amazon is still trading at a reasonable valuation of 3.2 times trailing-12-month sales and 2.9 times forward sales. Given the multiple secular tailwinds in online retail, cloud computing, and digital advertising, investing in Amazon’s AI-powered stock for the long term could unlock significant wealth for investors.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is also a member of The Motley Fool’s board of directors. Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Merck, Nvidia, and Salesforce. The Motley Fool recommends Amgen and Bayerische Motoren Werke Aktiengesellschaft.

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