What is happening to Amazon shares?

Amazon stock (NASDAQ: AMZN) has done well this year, up nearly 50% so far. This is well ahead of fellow tech giants Apple and Alphabet, which are each up about 34%. Amazon has obviously done a lot of things right. The massive infrastructure investments Amazon has made in recent years are showing clear signs of paying off as operating profits rise. The company also achieved good results in the advertising business. Amazon is also considered a big winner in the field of generative AI due to its cloud business. So what are some of the recent developments for Amazon stock?

Amazon is redoubling its efforts in developing its proprietary AI chips. Last week, the company unveiled Trainium3, its most powerful in-house AI chip, said to be twice as fast as its predecessor Trainium2 while offering about 40% better power efficiency. The chips are expected to be available in 2025 and are reportedly manufactured using TSMC’s latest 3nm technology. Regardless, if you want an uptrend with a smoother trajectory than an individual stock, consider the following: High quality portfolio, which has outperformed the S&P and returned >91% since inception.

Amazon markets its AI products to other companies. Apple, for example, says it uses Amazon’s AI chips for certain tasks such as search. The consumer tech giant has also said it is evaluating whether Amazon’s latest chip can be used to train AI models included in Apple Intelligence. Separately, Amazon announced plans for a massive AI supercomputer made up of hundreds of thousands of Trainium2 chips. While Amazon is expected to remain a significant customer of Nvidia’s cutting-edge GPUs, internal chip development could ultimately help the company reduce costs for its AWS business and potentially create new revenue streams. Learn why it might be time to sell Nvidia stock and buy Intel

Amazon is expanding into the automotive space with its new venture, Amazon Autos, which will allow customers to purchase vehicles in 48 U.S. cities. The platform will initially focus on selling new cars, with South Korea’s Hyundai as its launch partner. Amazon has indicated that it intends to gradually expand by adding more brands and cities in the coming years. Amazon will act as an intermediary, connecting customers with local dealers who will remain the end sellers of the vehicles. Although Amazon has little experience in the automotive industry, its large and highly engaged customer base, as well as widespread dissatisfaction with the experience of traditional car dealerships, should give it a meaningful opportunity.

Over a slightly longer period of time, Amazon stock returns have been more volatile than those of the S&P 500, at 2% in 2021, -50% in 2022, and 81% in 2023. In contrast, the Trefis High Quality Portfolio was at a The collection of 30 stocks is significantly less volatile. And it has outperformed the S&P 500 every year in the same period. Why is that? As a group, the stocks in the HQ Portfolio offered better returns with lower risk compared to the benchmark index. less of a rollercoaster ride, as the key performance indicators of the HQ portfolio show.

Amazon shares are increasingly seen as fair value. While the company has historically traded at negative or triple-digit price-to-earnings ratios, its valuation metrics are improving. The company’s stock currently trades at about 35 times consensus 2025 earnings. Although revenue growth may be slowing, Amazon’s margins are clearly on an upward trend. Amazon has implemented effective cost management strategies, adopted a more moderate pace of hiring, and increased operational efficiency. Last quarter, Amazon’s cloud division reported operating income of $10.4 billion, a notable 50% year-over-year increase and well ahead of its 19% revenue growth. Amazon has also optimized its investment strategy by reducing spending on lower-return e-commerce infrastructure while doubling down on technology infrastructure to meet increasing demand for artificial intelligence. At its current market price of $225, the share price is roughly in line with the Trefis price estimate of $230 per share – the Trefis estimate for Amazon’s rating.

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