Why Hedge Funds Are Bullish on Amazon.com, Inc. (AMZN)

Amazon.com, Inc. (AMZN) has been a darling of the investment community, with hedge funds increasingly bullish on the e-commerce and cloud computing giant. As of the end of December 2020, 273 hedge funds held long positions in AMZN, marking an 11% increase from the previous quarter and an all-time high for the number of hedge funds with bullish positions in the stock. This article explores the specific aspects of Amazon's business model and growth prospects that have led hedge funds to increase their bullish positions in the company.

1. AWS Market Leadership and Growth: Amazon Web Services (AWS) is a significant driver of AMZN's growth and profitability. As of Q3 2024, AWS commanded almost a third of the cloud market share and grew by 19% year-over-year, with revenue reaching $27.5 billion. This growth is attributed to the increasing government spending on tech infrastructure, with AWS being a key provider of services to the US government. Additionally, AWS is expanding its presence in key growth markets like India, Mexico, and the Middle East, further driving its growth prospects.
2. Capex Investments: Amazon has been investing heavily in its infrastructure, with capex of $74 billion in 2024, a significant portion of which was directed towards AWS. This investment is expected to rise in 2025, with planned expansions in Saudi Arabia, Japan, the US, Europe, and India. These investments aim to enhance reliability and at the same time broaden the client base, which is currently heavily concentrated towards large enterprises.
3. AI Integration: Amazon is integrating AI into its various business segments, including AWS, Amazon Go, and Alexa. This integration is expected to drive growth and innovation across the company's offerings, making it an attractive investment opportunity in the AI space.
4. Strong Fundamentals: Amazon's strong financial performance, with EPS of $4.67 and a forward EPS of $6.15, has also contributed to the increased bullish positions by hedge funds. The company's P/E ratio of 50.2 reflects its growth prospects and the market's confidence in its future performance.

These factors, along with the company's overall business model and growth prospects, have led hedge funds to increase their bullish positions in Amazon.com, Inc. As the company continues to invest in its infrastructure and expand its reach into new markets, hedge funds expect Amazon to continue its strong performance and deliver significant returns in the future.