Amazon: The Dark Horse on the Path to Wall Street's First $5 Trillion Company
Tuesday, Jan 14, 2025 5:08 am ET
5min read As the tech industry continues to evolve, investors are keeping a close eye on which companies have the potential to become the first to reach a $5 trillion market capitalization. While Nvidia (NVDA -1.41%) has been a standout performer in recent years, driven by the artificial intelligence (AI) boom, some analysts believe that Amazon (AMZN -0.22%) may be the dark horse candidate to achieve this milestone first. In this article, we will explore the factors that make Amazon's growth potential more robust than its peers and discuss why it may have the clearest path to becoming Wall Street's first $5 trillion company.
Amazon's diverse ecosystem provides immunity to competition and reduces the impact of any single segment's performance on the overall business. The company's revenue streams include e-commerce, subscriptions, grocery delivery, streaming, cloud computing, and more. This diversification makes it less vulnerable to competition in any one area and ensures that Amazon can continue to grow and innovate despite challenges from competitors.
One of the key drivers of Amazon's future growth is its cloud computing segment, Amazon Web Services (AWS). AWS is the world's leading cloud infrastructure service platform, with an estimated 33% share of total cloud spending during the third quarter of 2024. AWS is Amazon's primary source of operating income and has seen material acceleration in revenue and profits since the company's relationship with Anthropic. As AI adoption increases, so will the demand for cloud computing services, positioning Amazon well to capitalize on this growth.
Amazon's investment in AI, including a $4 billion investment in Anthropic, is also expected to boost AWS's growth. These investments are paying off, as seen in the growth of AWS's revenue and profits. As AI becomes more integrated into businesses, Amazon's early investments and expertise in the field could provide a competitive advantage.
In addition to its strong financial position, Amazon's undervalued advertising business is another factor that could contribute to its growth. Amazon's advertising business is monumentally discounted compared to its peers, and as this business grows, it could further hinder the growth of competitors like Alphabet, which relies heavily on advertising revenue.
While Nvidia has been a standout performer in recent years, its reliance on the AI market and the potential for an AI bubble to burst could pose a risk to its valuation. In contrast, Amazon's diverse ecosystem and strong financial position make it a more robust candidate for becoming Wall Street's first $5 trillion company.
In conclusion, Amazon's diverse ecosystem, strong financial position, and investment in AI and cloud computing make it a dark horse candidate for becoming Wall Street's first $5 trillion company. While Nvidia has been a standout performer in recent years, its reliance on the AI market and the potential for an AI bubble to burst could pose a risk to its valuation. As the tech industry continues to evolve, investors should keep a close eye on Amazon's progress and consider its potential to become the first company to reach a $5 trillion market capitalization.
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