Two Compelling Reasons to Invest in Amazon Stock Now

In a market buzzing with high-flying stocks, it can be easy to overlook established giants like Amazon (AMZN). However, passing up on these industry leaders could be a misstep. Amazon stands poised to seize two monumental opportunities that could significantly boost its growth prospects.

Below are the key reasons why now might be the perfect time to invest in Amazon and take advantage of trends in artificial intelligence (AI), cloud computing, and digital advertising.

1. Massive Potential in AI Cloud Computing

The first compelling reason to consider Amazon as a stock investment lies in its significant potential within AI. Recently, Amazon made headlines by investing an additional $4 billion in Anthropic, a leader in AI innovation that created the AI chatbot called Claude. This brings Amazon's total investment in Anthropic to $8 billion, making it the primary cloud provider and training partner for the startup.

This strategic partnership positions Amazon favorably in the AI cloud computing landscape, allowing it to integrate Anthropic's services into Amazon Web Services (AWS). This further strengthens AWS’s existing momentum, which saw sales grow by 19% in the third quarter, reaching $27.5 billion. According to Amazon's CFO, customers are increasingly realizing that to leverage the full benefits of generative AI, they need to migrate to the cloud.

According to research firm Goldman Sachs, the AI cloud computing market could potentially skyrocket to an estimated $2 trillion by 2030. Given Amazon's substantial market share of 31% in cloud computing, the company is well-positioned to capitalize on the anticipated surge in AI cloud services in the years ahead.

2. Growth of Amazon's Advertising Business

Advertising might not be the first industry that comes to mind when thinking about Amazon, but its advertising segment has been experiencing remarkable growth that merits attention.

During the third quarter, Amazon's ad sales climbed by 19%, hitting $14.3 billion. To give you a clearer picture, this figure is $1.7 billion more than what the company generated in total ad sales just five years ago. This growth trajectory has allowed Amazon to capture a 13.9% share of the U.S. digital ad market, a figure projected to rise to 17.3% by 2026, as reported by eMarketer. By the end of 2026, the company's ad sales could reach around $94.5 billion, effectively more than doubling its 2023 figures.

Looking ahead, a significant shift toward digital advertising is anticipated, with Statista projecting that by 2030, 84% of U.S. advertising spending will go to digital formats. Amazon's robust presence in e-commerce and its ambition to enhance offerings like digital video content (including Prime Video and live sports events) will likely bolster its advertising revenue.

Amazon's Valuation Might Surprise You

While it’s true that Amazon's stock isn't necessarily a steal at the moment, it might not be as overpriced as some investors think. Currently, Amazon's shares have a forward price-to-earnings (P/E) ratio of 33.4, which is a modest premium compared to the S&P 500's forward P/E ratio of 27.8.

Considering Amazon's strong footing in both AI cloud computing and its rapidly expanding advertising segment, investing in Amazon stock could still represent a promising opportunity.

Disclosure: The author does not hold positions in any of the stocks referenced in this article, and this article should not be considered as financial advice.

Amazon, Investment, AI