Where will Amazon stock be in 3 years?

As the calendar approaches the end of 2024, Amazon (NASDAQ:AMZN) The stock has had another stellar year, up 52% year-to-date. The company has a number of growth drivers, most notably its highly competitive generative artificial intelligence (AI) business. Let’s see where it could be in three years.

It’s interesting that two years ago AI wasn’t a big topic of conversation for Amazon and today it’s the main buzzword.

Amazon has been using AI across its businesses for years to analyze data and make decisions about planning, merchandising and fulfillment. But it’s only with the development of generative AI in the last two years that this trend has emerged and is already making a huge impact across the organization.

There are now generative AI elements across all of Amazon’s businesses, which I will discuss in more detail, but the launch as a separate company is through the cloud computing segment of Amazon Web Services (AWS). AWS is the largest cloud services provider in the world and generative AI provides incredible functionality to AWS customers.

Amazon wants to be everything to everyone, and this company is no different. CEO Andy Jassy says there are three tiers to suit every need and budget. It provides customers with tools to build their own large language models (LLMs) and train their own data at the lowest level, the option for developers to use Amazon’s LLMs to train their data at the middle level, and ready-to-use options for smaller businesses on the top level.

The AI business is generating incredible interest from customers and is already generating billions of dollars for Amazon. The company continues to improve it and launch new features. It recently announced that it would launch its own graphics processing units (GPUs), the chips that form the building blocks of generative AI. They should compete with partners in terms of price NvidiaGPUs.

Generative AI not only increases sales but also brings new customers to AWS. AWS sales have slowed, but as inflation eases and the AI business becomes very attractive, sales are accelerating. With AWS accounting for more than half of Amazon’s total operating income – 60% in the third quarter – these developments are expected to have a positive impact on Amazon’s profitability.

AI is already changing rapidly and in three years it will be much more comprehensive and offer more breakthrough services. Jassy has said many times that 90% of corporate spending is still on-premises and that this is moving to the cloud. If it happens, as he expects, it will trigger a tidal wave of business for Amazon, and the company is shifting into gear to deal with it.

E-commerce is less exciting than AI these days, but it’s still Amazon’s core business. Amazon has a stunning lead in US e-commerce and is constantly evolving to offer faster deliveries and better service. The company recently opened its most modern warehouse in Louisiana, where the new design reduces processing time by 25%.

E-commerce’s share of retail sales is increasing and Amazon is consolidating its lead. It offers its third-party vendors generative AI services that make creating product descriptions and videos even easier, and provides effective data analytics to help convert sales.

In three years, Amazon should maintain its top spot and potentially have an even bigger lead over the competition. The company is always trying to get into physical retail on a larger scale, and while this still remains a small part of its business and several attempts have been completed, I wouldn’t be surprised to see new attempts in the next three years.

Advertising isn’t one of Amazon’s largest businesses, but it has been its fastest-growing for some time, making it worth discussing as its own segment. Advertising sales rose 19% year over year in the third quarter, as did AWS sales. Amazon offers advertisers the same benefits of AI as third-party sellers and AWS users, with robust data to create strong and effective marketing campaigns.

The company now also offers video ads across its ad-supported streaming offerings in Prime Video, which is an exciting addition to the platform.

Advertising was only spun off into its own segment in 2022 and will still play a large role in sales in three years. Since it is an asset-light company, it should also make a positive contribution to the operating result.

Amazon always has something new up its sleeve. The company is making headway in Amazon Pharmacy and healthcare, and now even sells cars on its platform. Three years from now, there will likely be updates that investors can’t expect today, and it’s all in Amazon’s innovative spirit that makes Amazon a great stock to own today.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.

Where will Amazon stock be in 3 years? was originally published by The Motley Fool

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