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Globe and Mail
20-05-2025
- Business
- Globe and Mail
4 Reasons to Buy Amazon Stock Like There's No Tomorrow
Amazon (NASDAQ: AMZN) has grown to become one of the largest companies in the world, with a market cap of over $2 trillion. While the stock has rallied off its lows, its shares are still down on the year, marking this a good time to buy the stock. Let's look at four reasons to pile into the stock right now. 1. A cloud computing winner While best known for its e-commerce operations, Amazon's largest business by profitability is actually its cloud computing division, Amazon Web Services (AWS). The company created the cloud computing and infrastructure-as-a-service industry after its own struggles to scale its infrastructure needs. It remains the largest cloud computing service in the world, with around a 30% market share. AWS is also Amazon's fastest-growing segment, with revenue rising 17% last quarter to $29.3 billion and operating income up 22% to $11.5 billion. The growth is being fueled in part by customers building and deploying artificial intelligence (AI) models and applications through services like Bedrock and SageMaker. Bedrock offers customer access to a variety of leading foundation models that they can fine-tune, while SageMaker provides an end-to-end platform for building, training, and deploying models from scratch. Customers then run these AI workloads on AWS, driving further usage and revenue growth. Amazon has also developed its own AI chips through its Annapurna Labs subsidiary. Its Trainium chip is optimized to train large language models (LLMs), while its Inferentia chip is designed for inference. Custom chips tend to perform better at specific tasks while using less power. This helps lower the overall cost of ownership and gives Amazon a cost advantage over its competition. With its AI business capacity constrained, Amazon is investing heavily to build out its data center infrastructure. While there is a risk of overbuilding, which could pressure margins if this were to occur, right now all the major cloud computing players are seeing tremendous demand and racing to keep up with demand. 2. Easing tariff worries While AWS has been Amazon's biggest growth driver, its e-commerce business is still a major contributor to the company. While its North American segment has been seeing solid revenue growth, including 8% in Q1, the company is not immune to tariff and trade war pressures. First and foremost, Amazon is a general merchandise retailer. If the tariffs lead to a weakening economic environment and lower consumer spending, its e-commerce business is going to feel the impact. Meanwhile, many of the goods that it and its third-party merchants sell on its platform are manufactured in China. Higher tariffs can lead to higher prices, which can lead to less consumer spending as well. Amazon could also choose to eat some of the cost of tariffs on the goods it sells, but that would impact its gross margins and profits. As such, it was good news for Amazon when the U.S. agreed to reduce Chinese tariffs from 145% to 30% over the next 90 days as the two countries work on a broader trade deal. The so-called "de minimis" tariff, however, was left in place (albeit with a reduction), but this is actually good for Amazon, as it primarily impacts Chinese competitors that are directly selling to U.S. customers, such as Temu and Shein. The risk, of course, is that this is just a temporary pause and the trade war picks back up down the road. 3. Improving margins Pushing the trade war aside, Amazon has been seeing a nice improvement in its margins and profitability. Much of this is stemming from its use of AI. For example, the company is using AI-powered robots to help in its fulfillment centers that can perform such tasks as lifting heavy objects, sorting, and carrying packages. Some robots also recognize damaged goods, preventing shipment; and in general, robots make fewer mistakes than humans. Along the same lines, it is using AI on its e-commerce platform to call out items that are frequently returned. Reducing returns is a big cost savings for Amazon. Meanwhile, the company is also using AI to help optimize routes in its logistics business. This can help drivers deliver items more quickly and save on fuel costs. Taken together, this is all helping the company become more efficient and reduce costs. AI is also helping fuel growth in Amazon's high-margin sponsored ad business by improving campaign performance and better targeting users on its marketplace platform. The company is using AI to both improve ad creation and deliver more relevant ads to consumers. One example of this is that it has developed a generative AI tool to help advertisers create AI-generated images for their sponsored ad campaigns. All this is leading to the company seeing strong operating leverage. North America's operating income surged 16% in Q1, on only an 8% increase in revenue. 4. An attractive valuation Despite the stock's recent rally from its lows, it still trades at one of its lowest valuations in its storied history. While this could be due to an exception of future lower returns, I think the company was plenty of growth ahead, as discussed above. AMZN PE Ratio (Forward) data by YCharts. Taken altogether, Amazon looks like a great investment over the long term. The stock has fallen, primarily on concerns over the impact of tariffs on both the consumer and its business. However, this is likely more cyclical in nature, and doesn't impact the company's long-term prospects. As such, I'd be a buyer of the stock at current levels. Don't miss this second chance at a potentially lucrative opportunity Ever feel like you missed the boat in buying the most successful stocks? Then you'll want to hear this. On rare occasions, our expert team of analysts issues a 'Double Down' stock recommendation for companies that they think are about to pop. If you're worried you've already missed your chance to invest, now is the best time to buy before it's too late. And the numbers speak for themselves: Nvidia: if you invested $1,000 when we doubled down in 2009, you'd have $351,127!* Apple: if you invested $1,000 when we doubled down in 2008, you'd have $40,106!* Netflix: if you invested $1,000 when we doubled down in 2004, you'd have $642,582!* Right now, we're issuing 'Double Down' alerts for three incredible companies, available when you join Stock Advisor, and there may not be another chance like this anytime soon. See the 3 stocks » *Stock Advisor returns as of May 19, 2025
Yahoo
29-01-2025
- Business
- Yahoo
AI Could Reshape Everything We Know About Climate Change
A circuit board at Annapurna Labs in Austin, Texas in 2024. Credit - Sergio Flores/Bloomberg—Getty Images With one announcement, Chinese AI startup DeepSeek shook up all of Wall Street and Silicon Valley's conventional wisdom about the future of AI. It should also shake up the climate and energy world. For the last year, analysts have warned that the data centers needed for AI would drive up power demand and, by extension, emissions as utilities build out natural gas infrastructure to help meet demand. The DeepSeek announcement suggests that those assumptions may be wildly off. If the company's claims are to be believed, AI may ultimately use less power and generate fewer emissions than anticipated. Still, don't jump for joy just yet. To my mind, the biggest lesson for the climate world from DeepSeek isn't that AI emissions may be less than anticipated. Instead, DeepSeek shows how little we truly know about what AI means for the future of global emissions. AI will shape the world's decarbonization trajectory across sectors and geographies, disrupting the very basics of how we understand the future of climate change; the question now is whether we can harness that disruption for the better. 'We're just scratching the surface,' says Jason Bordoff, who runs the Center on Global Energy Policy at Columbia University about the implications of AI for emissions. 'We're just at inning one of what AI is going to do, but I do have a lot of optimism.' Many in the climate world woke up to AI early last year. Over the course of a few months, power sector experts issued warnings that the U.S. isn't prepared for the influx of electricity demand from AI as big technology companies raced to deploy data centers to scale their ambitions. A number of studies have found that data centers could account for nearly 10% of electricity demand in the U.S. by 2030, up from 4% in 2023. Many big tech companies have worked to scale clean electricity alongside their data centers—financing the build out of renewable energy and paying to open up dormant nuclear plants, among other things. But utilities have also turned to natural gas to help meet demand. Research released earlier this month by Rystad Energy, an energy research firm, shows that electric utilities in the U.S. have 17.5 GW of new natural gas capacity planned, equivalent to more than eight Hoover Dams, driven in large part by new data centers. All of this means an uptick in emissions and deep concern among climate advocates who worry that the buildout of electricity generation for AI is about to lock the U.S. into a high-carbon future. As concerning as this might be, the projections for short-term electricity demand growth might mask much more challenging risks that AI poses for efforts to tackle climate change. As AI drives new breakthroughs, it will change consumption patterns and economic behavior with the potential to increase emissions. Think of a retailer that uses AI to better tailor recommendations to a consumer, driving purchases (and emissions). Or consider an AI-powered autonomous vehicle that an owner leaves to roam the streets rather than paying for parking. At the most basic level, AI is bound to generate rapid productivity gains and rapid economic growth. That's a good thing. But it's also worth remembering that since the Industrial Revolution, rapid economic growth has driven a rise in emissions. More recently, some developed economies have seen a decoupling of growth from emissions, but that has required active effort from policymakers. To avoid an AI-driven surge in emissions may require an active effort this time, too. But AI isn't all risk. Indeed, it's very easy to imagine the upsides of AI far outweighing the downsides. Most obviously, as DeepSeek shows, there may be ways to reduce the emissions of AI with chip innovation and language model advances. As the technology improves, efficiencies will inevitably emerge. The data center buildout could also catalyze a much wider deployment of low-carbon energy. Many of the technology companies that are investing in AI have committed to eliminating their carbon footprints. Not only do they put clean electricity on the grid when they build a solar farm or restart a nuclear power plant, but they help pave the way for others. 'Governments are starting to realize that if they're going to attract data centers, AI factories, and wider technology companies into their countries, they have to start removing the barriers to renewable energy,' says Mike Hayes, head of climate and decarbonization at KPMG. And then there are all the ways that AI might actually cut emissions. Researchers and experts group the potential benefits into two categories: incremental improvements and game changers. The incremental improvements could be manifold. Think of AI's ability to better identify sites to locate renewable energy projects, thereby greatly increasing the productivity of renewable energy generation. AI can help track down methane leaks in gas infrastructure. And farmers can use AI to improve crop models, optimizing crop yield and minimizing pollutants. The list goes on and on. With a little consideration, you could probably identify a way to reduce emissions in every sector. It remains difficult to quantify how these incremental improvements all add up, but it's not hard to imagine that emissions reductions thanks to these developments could easily outweigh even the most dramatic estimates of additional pollution. And then there are the game changers that could, in one blow, completely transform our ability to decarbonize. At the top of that list is nuclear fusion, a process that could generate abundant clean energy by combining atomic nuclei at extremely high temperatures. Already, start-ups are using AI to help optimize their fusion reactor designs and experiments. A fusion breakthrough, supported by AI technologies, could provide a clean alternative to fossil fuels. It could also power large-scale carbon dioxide removal. This would give the world an opportunity to suck carbon out of the atmosphere affordably and pull the planet back from extreme temperature rise that may otherwise already be baked in. 'If you think like a venture capital investor, you're betting 1 or 2% of incremental emissions, but what could the payoff potentially be?' asks Cully Cavness, co-founder of Crusoe, an AI infrastructure company. 'It could be things like fusion, which could address all the emissions.' For those of us, myself included, who haven't spent the last decade thinking deeply about AI, watching it emerge at the center of the global economic development story can feel like watching a juggernaut. It came quickly, and it's hard to predict exactly where it will go next. Even still, it seems all but certain that AI will play a significant role shaping our climate future, far beyond the short-term impact on the power sector. Exactly what that looks like is anyone's guess. TIME receives support for climate coverage from the Outrider Foundation. TIME is solely responsible for all content. Write to Justin Worland at
