Latest news with #Inferentia
Yahoo
28-05-2025
- Business
- Yahoo
Amazon Just Sent a Massive Warning to Nvidia Investors
Amazon is one of Nvidia's biggest customers. The cloud computing giant recently made a new AI investment in one of Nvidia's biggest competitors. The market is primed for the smaller company to take up more real estate in data centers. 10 stocks we like better than Advanced Micro Devices › Nvidia (NASDAQ: NVDA) has seen its sales soar on the back of a few big customers spending heavily to outfit data centers with as many of the chipmaker's GPUs as they can buy. Its top three customers accounted for 34% of sales last year. Amazon (NASDAQ: AMZN) is likely one of those big customers. The cloud computing giant spent over $93 billion in capital expenditures over the last 122 months, primarily focused on building out data centers for artificial intelligence (AI). That number will climb above $100 billion this year. While there's a lot of overhead, including buildings, server racks, networking equipment, and more, a good chunk of that spending goes to Nvidia for its leading-edge GPUs. But Nvidia's chips aren't the only ones Amazon uses in its servers, and the company just sent a signal that a competitor could be taking up more space in its data centers this year. Amazon was caught flat-footed as generative AI took off in late 2022, but it's invested heavily to catch up with its competitors ever since. It made a $4 billion investment in Anthropic early last year, and it added another $4 billion in November. The most recent deal included a strategic partnership where Anthropic will use Amazon's custom silicon for large language model training and inference. Amazon's custom AI chips are designed in partnership with Marvell Technologies. Marvell also makes networking chips and other data center chips among a broader silicon portfolio. Amazon made a small equity investment in the company in late 2021 well before it chose the chipmaker for its custom Trainium and Inferentia chips. Amazon recently made another AI investment. Its first-quarter 13F filing with the SEC revealed a purchase of 822,234 shares of Advanced Micro Devices (NASDAQ: AMD). Those shares are worth about $90 million at today's price, which isn't a huge investment for a company generating tens of billions of dollars in free cash flow every quarter. However, that's still enough to make it Amazon's third-largest marketable equity holding in its portfolio. AMD is Nvidia's closest competitor when it comes to advanced GPUs. It's also the only company Intel has licensed to use its x86 CPU architecture, which is essential for Windows PCs and servers. The chipmaker is well positioned to gain market share on both fronts (GPUs and CPUs), and Amazon's equity investment could signal an acceleration in AMD's sales to the largest cloud computing company in the world. AMD CEO Lisa Su believes the AI accelerator market -- which includes GPUs and custom silicon solutions like Marvell's -- will grow at an average rate of 60% per year from 2025 through 2028 to reach $500 billion. While Nvidia will likely take the bulk of that spend, smaller companies are positioned to gain market share over that period with improved price performance. Not to mention, AMD and other chipmakers offer cloud providers a chance to diversify away from reliance on Nvidia, ensuring Nvidia's chip prices don't balloon out of control. Indeed, AMD recently struck a deal with Oracle to deploy a cluster of 30,000 AMD MI355X accelerators, which helped push AMD's data center segment revenue 57% higher year over year in the first quarter. AMD's existing data center partnerships for its EPYC CPUs with all the hyperscalers put it in a great position to expand those relationships with its Instinct GPUs. On top of the opportunity in GPUs, AMD has become a leading provider of CPUs for cloud computing. That can be attributed to Intel falling behind in technological capabilities relative to Taiwan Semiconductor Manufacturing, where AMD prints its chips. As a result, AMD can offer better price performance with its more power-efficient chips. With better CPUs and a competitive GPU lineup, AMD should continue to take up more and more real estate in the hyperscalers' data centers. Investors can buy AMD stock today for 27-times forward earnings. That's a premium to the overall market, but a discount relative to Nvidia, which trades closer to 32-times earnings. That said, Nvidia continues to grow faster than AMD thanks to its pricing power and scale, so it may deserve a premium to AMD. Amazon very likely bought shares at a better valuation than investors can get today, but its stake in AMD is a strong indication that the chipmaker is continuing to make progress in gaining market share. Given AMD's solid CPU business and the upside potential of gaining share in the fast-growing AI accelerator market, the stock looks less risky than Nvidia at its current price. Before you buy stock in Advanced Micro Devices, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Advanced Micro Devices wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $639,271!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $804,688!* Now, it's worth noting Stock Advisor's total average return is 957% — a market-crushing outperformance compared to 167% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Levy has positions in Amazon and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Intel, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Marvell Technology and recommends the following options: short May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy. Amazon Just Sent a Massive Warning to Nvidia Investors was originally published by The Motley Fool Sign in to access your portfolio
Yahoo
22-05-2025
- Business
- Yahoo
Prediction: This Artificial Intelligence (AI) Stock Will Be Worth $5 Trillion in 5 Years
Artificial intelligence (AI) has become a core focus for Amazon's e-commerce and cloud infrastructure businesses in particular. In less than two years, Amazon's valuation has soared by nearly $1 trillion as AI-driven efficiencies are starting to become realized. Amazon's long-term growth prospects look strong, and a $5 trillion valuation by 2030 looks achievable. 10 stocks we like better than Amazon › Amazon (NASDAQ: AMZN) is best known for its e-commerce marketplace and Prime subscription service. While online shopping and fast shipping are indeed two of Amazon's major pillars, the company has been quietly building new opportunities in the area of artificial intelligence (AI). Let's explore what investments Amazon has made in AI over the last couple of years, and how they are reaping dividends for the company's growth. From there, I'll break down why AI is such a meaningful tailwind for the company and explain why I think Amazon is headed for a $5 trillion valuation over the next five years. Amazon has been investing aggressively in several different areas of AI. Chief among them is that the company has plowed a whopping $8 billion into generative AI start-up Anthropic. Anthropic is now an integral part of Amazon's cloud infrastructure business, Amazon Web Services (AWS) -- spurring a new period of accelerating revenue and operating margins. On top of that, Amazon has also been designing its own custom silicon chips -- dubbed Trainium and Inferentia. In theory, by using its own custom tech stack and moving away from a reliance on outside GPUs from Nvidia or Advanced Micro Devices, Amazon has the ability to enter new markets and generate significant cost synergies in the long run. Lastly, Amazon is also leading the charge in AI robotics -- outfitting many of its fulfillment centers with machines that are able to automate human-driven processes. This is yet another way Amazon is positioning itself to yield greater returns on its AI investments by making core parts of the business more efficient. Amazon and Anthropic initially announced their partnership on Sept. 25, 2023. Since that announcement, Amazon has added nearly $1 trillion in market capitalization (as of May 19). Admittedly, an increase of this magnitude in such a short time frame may suggest shares of Amazon are due for a pullback. While I wouldn't rule that out, I think the longer-term picture for Amazon remains bullish. During Amazon's first-quarter earnings call earlier this month, CEO Andy Jassy told investors that the company's "AI business right now is a multibillion-dollar annual run rate business that's growing triple-digit percentages year over year." He followed that up by saying, "as fast as we actually put the capacity in, it's being consumed." Jassy is essentially saying that demand for Amazon's AI services is so high that the company needs to quickly reinvest back into these operations in order to fulfill customer needs. These supply-demand dynamics aren't going to be solved in one quarter, but they are very good problems to have. The big picture is that customers can't get enough of Amazon's AI ecosystem, suggesting the business is in a strong position to scale over the coming years. The chart illustrates Wall Street's consensus revenue estimates for Amazon over the next couple of years. Between now and 2027, analysts expect Amazon to maintain 10% annual revenue growth. If I assume this rate does not change, Amazon would be on pace to generate $1.1 trillion in sales by 2030. As of this writing, Amazon's price-to-sales (P/S) ratio is 3.4 -- much lower than many of its "Magnificent Seven" peers. If Amazon maintains this P/S multiple, the company would be trading for a market cap of roughly $3.8 trillion by 2030. In order to reach a $5 trillion valuation, Amazon's P/S would need to expand to roughly 4.5, assuming a 10% annual growth rate. The way I think about Amazon's valuation dynamics is that the company has already added nearly $1 trillion in value, despite AI being an incredibly nascent part of the business right now. Over the next five years, I think Amazon's AI-inspired investments will start to become more obvious -- seen through accelerating revenue across different areas of the business, widening operating margins, and robust free cash flow growth. Should this come to fruition, I think Amazon could be in a position to witness either an increase in revenue above 10% annual growth, or an expansion in its multiples -- bringing it in line with other leading cloud and chip businesses such as Microsoft or Nvidia. To me, Amazon has multiple avenues to achieve a $5 trillion valuation by 2030. I think the stock is trading at attractive levels right now, and long-term investors may want to consider scooping up shares and holding on tight. Before you buy stock in Amazon, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Amazon wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $644,254!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $807,814!* Now, it's worth noting Stock Advisor's total average return is 962% — a market-crushing outperformance compared to 169% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adam Spatacco has positions in Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy. Prediction: This Artificial Intelligence (AI) Stock Will Be Worth $5 Trillion in 5 Years was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
20-05-2025
- Business
- Yahoo
This Artificial Intelligence (AI) Chipmaker Just Got a Game-Changing Boost From Amazon, and Nvidia Investors Should Be Paying Close Attention
Per its most recent 13F filing, Amazon just initiated a position in Advanced Micro Devices. AMD is fast emerging as a real competitive force against Nvidia in the world of AI-powered GPUs. Amazon joins Oracle, Meta Platforms, and Microsoft as Nvidia customers that are turning toward AMD. 10 stocks we like better than Advanced Micro Devices › Each quarter, investors get a glimpse into which stocks "smart money" investors on Wall Street are buying and selling thanks to a nifty tool called the Form 13F. These filings are required by the Securities and Exchange Commission (SEC), and essentially serve as an itemized breakdown of what stocks large money managers bought and sold during the most recent quarter. Beyond traditional financial institutions such as hedge funds and banks, corporations are also required to file a 13F if they also own positions in other public companies. Let's explore what investments Amazon made during the first quarter, and assess what it could mean for Nvidia in the long run. According to its most recent 13F, Amazon holds stock in nine public companies. Among its long-term positions are electric vehicle (EV) manufacturer Rivian Automotive as well as semiconductor stock Marvell Technology. During the first quarter, Amazon complemented its exposure to chip stocks by initiating a position in Advanced Micro Devices (NASDAQ: AMD). Per the filing, Amazon purchased 822,234 shares of AMD -- worth about $84 million at its current price. Over the last couple of years ago, Amazon has invested $8 billion into an artificial intelligence (AI) start-up called Anthropic. Per the terms of their partnership, Anthropic uses Amazon's cloud infrastructure, Amazon Web Services (AWS), to train its generative AI models. Furthermore, Anthropic also leverages Amazon's custom silicon chips -- dubbed Trainium and Inferentia. Since Anthropic has become a new pillar supporting AWS, the cloud infrastructure business has accelerated both revenue growth and operating margin. This is important, as these dynamics underscore that Amazon is already generating strong unit economics on its AI-related investments. This provides Amazon with a high degree of financial flexibility, which it can use to make further investments in other pockets of the AI realm. This is why I think the investment in AMD is so notable. Amazon already uses a combination of its in-house chips with Nvidia's GPU architecture. However, by investing in AMD, Amazon may be looking to complement its current chip stack -- ultimately making moves to further migrate away from Nvidia. Given Amazon is doubling down on AI infrastructure projects, including data center buildouts, I'm optimistic that AMD has a lucrative opportunity to emerge as a key partner to the cloud hyperscaler and begin to encroach on Nvidia's market share. As of this writing, AMD's forward price-to-earnings (P/E) multiple is 29. For context, the average forward P/E across the S&P 500 index is about 20. The disparity between AMD's forward P/E compared to that of the S&P 500 might suggest that the semiconductor stock is a bit pricey. I don't necessarily see it that way, however. Per the graph below, investors can see that AMD's forward P/E has been on the decline for a year now. To me, this suggests that investors may have some questions over the company's growth prospects. Taking this a step further, my suspicion is that investors are doubtful that AMD's growth will ever match that of Nvidia. To me, that isn't the best approach when evaluating an investment in AMD. Instead, I'd encourage investors to consider just how quickly the company has scaled its data center GPU business over the last year while winning over the likes of Meta Platforms, Microsoft, and Oracle as key customers. Just like Amazon, all of those companies also rely heavily on Nvidia chips -- and yet have recently been turning to AMD as an alternative provider. When you take these details into account, combined with the fact that AMD is launching new GPU architectures later this year, it could be argued that the stock is actually trading for a reasonable price considering investor expectations seem to be somewhat conservative. I think Amazon's decision to make an investment in AMD adds validity to the chipmaker's reputation, and I wouldn't be surprised if the company becomes an integral part of Amazon's AI infrastructure roadmap. I see AMD stock as a no-brainer buying opportunity right now. Investors may want to consider a position in AMD, because its prospects could be more robust in the long run compared to Nvidia, as Nvidia continues to push against headwinds such as custom silicon designs and new architectures from AMD. Before you buy stock in Advanced Micro Devices, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Advanced Micro Devices wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $642,582!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $829,879!* Now, it's worth noting Stock Advisor's total average return is 975% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Adam Spatacco has positions in Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends Marvell Technology and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy. This Artificial Intelligence (AI) Chipmaker Just Got a Game-Changing Boost From Amazon, and Nvidia Investors Should Be Paying Close Attention was originally published by The Motley Fool
Yahoo
11-05-2025
- Business
- Yahoo
Nasdaq Recovery: 3 Artificial Intelligence (AI) Stocks That Are Still Too Cheap to Ignore
After a terrible start to 2025, tech stocks are regaining some of their lost value. Artificial intelligence remains a huge driving force for earnings and revenue growth. These three stocks are all trading well off their all-time highs, but their growth prospects remain strong. These 10 stocks could mint the next wave of millionaires › In case you missed it, tech stocks are rallying again. After hitting an all-time high in December, the Nasdaq Composite index fell in January as DeepSeek upended the artificial intelligence (AI) universe with breakthroughs in training and inference efficiency. By late February, many feared that some of the biggest names in tech could be hit hard by President Donald Trump's tariffs. The sell-off accelerated in April after the global tariffs Trump announced turned out to be even worse than investors had feared. In the weeks since, the Nasdaq has recovered about half of its losses from peak to trough. As of this writing, the tech-heavy index sits just a bit more than 12% below its December high. But there are still plenty of great opportunities in the market. Here are three AI stocks that are still too cheap to ignore. Amazon (NASDAQ: AMZN) operates the leading cloud computing platform in the world. Its Amazon Web Services (AWS) segment generated $29.3 billion last quarter, up 17% year over year. While that growth rate was slower than its chief competitors, it's worth pointing out a couple of things. First, AWS is significantly bigger than those competitors; second, it remains capacity constrained. Management expects to bring more AWS capacity online in the second half of the year. The company is planning for over $100 billion in capital expenditures in 2025, and most of that sum will go toward increasing AWS' capacity. It's also investing heavily in its own custom silicon solutions for AI -- the Trainium and Inferentia machine learning chips. CEO Andy Jassy said Amazon is seeing strong adoption of its Trainium instances. But not all of that spending is going toward bolstering its data centers to support increased use of AI. Amazon also continues to spend on improving its logistics network. After rapidly expanding its footprint in 2020 and 2021, Amazon has spent the last few years overhauling its logistics system to drive higher efficiency in the network. The results have been fantastic: Shipping expenses grew just 3% year over year last quarter, while paid units grew 8%. Amazon remains well positioned for the long term. Its crown as the e-commerce champion isn't going anywhere. While tariffs might impact its retail operations, it won't be the only retailer impacted. The strong margin expansion it accomplished over the last two years has put it in a better position to absorb higher costs and reduced demand. Meanwhile, it remains an indispensable platform for developers and a leading resource for AI tools and services through AWS. Investors can currently buy the stock for a relatively low valuation. Its enterprise value is less than 3 times 2025 sales estimates. That's about 10% below its long-term average. Lam Research (NASDAQ: LRCX) is one of the top manufacturers of semiconductor fabrication equipment -- and all of the high-end AI chips going into data centers pass through its machines at various stages of their construction. Lam has a particular edge in equipment for memory chips. In the first quarter, 43% of its revenue came from memory chip manufacturers, and that share has climbed significantly over the last couple of years due to advancements in AI chips. To get peak performance out of cutting-edge graphics processing units (GPUs), they must be deployed in systems that also feature high-bandwidth memory chips. Memory is frequently the bottleneck in training large language models (LLMs), and as those models have gotten bigger, demand for memory chips has grown significantly. But Lam is also benefiting from high demand for its equipment for general silicon chip production. As foundries invest heavily in expanding their capacity to meet rising demand from chip designers, Lam is selling more equipment and inking more contracts to service that equipment. Last quarter, its revenue grew by 24%, and management expects growth to accelerate in Q2 despite the uncertainty caused by tariffs. It also expects its operating margins to expand as it leverages its fixed costs. Over the long run, Lam benefits from a virtuous cycle. As a leading equipment provider to chip manufacturers, it generates more revenue that it can invest into research and development. That allows it to extend its technological lead and win more contracts. As a result, management expects to increase its market share in the wafer fabrication equipment space over time, outpacing the growth of the semiconductor industry. Lam shares have dropped considerably from the highs reached back in 2024. The stock now trades for just 19 times forward earnings estimates. With management expecting double-digit percentage earnings growth over the next four years, investors should be happy to pay that price for the stock. Meta Platforms (NASDAQ: META) is the company behind Facebook and Instagram, and it's making some of the tech sectors' biggest bets on artificial intelligence. At the time of its first-quarter earnings report, management announced it had increased its plans for capital spending this year to between $64 billion and $72 billion, up from previous plans for capex of between $60 billion and $65 billion. While other companies are spending more, they're also renting out some of their computing infrastructure. The investments appear to be worth it, though. Meta is seeing strong engagement growth, which leads to more ad impressions on its platforms. On top of that, its average ad prices continue to climb, propelling revenue higher by 16% last quarter. That result stands out among other social media advertising companies, which have struggled to replicate Meta's success recently. But AI offers even more opportunities for Meta. AI-powered marketing tools can help advertisers design and test new campaigns. CEO Mark Zuckerberg eventually sees Meta's AI acting as an agent for businesses, taking a client's objective and budget, and then creating the entire campaign for them. AI agents could also serve key roles in customer service and sales via Meta's messaging apps, WhatsApp and Messenger. That could ultimately become a significant source of revenue, considering those apps' massive user bases. Meta has also proven to be a cash-generating machine. Even while sinking billions into AI and metaverse development, the company has produced $10 billion or more in free cash flow for eight straight quarters. That provides it with a huge advantage in terms of its ability to keep investing in the development of technologies that can provide it with additional growth opportunities. Though its share price has been recovering from its 2025 slide -- a rebound that continued after its Q1 earnings release -- Meta stock still trades for just 23 times forward earnings estimates. Given its potential to book double-digit percentage earnings growth and its huge competitive advantages in its industry, Meta's stock is too cheap to ignore at this price. 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 $302,503!* Apple: if you invested $1,000 when we doubled down in 2008, you'd have $37,640!* Netflix: if you invested $1,000 when we doubled down in 2004, you'd have $614,911!* Right now, we're issuing 'Double Down' alerts for three incredible companies, available when you join , and there may not be another chance like this anytime soon.*Stock Advisor returns as of May 5, 2025 John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Adam Levy has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Amazon, Lam Research, and Meta Platforms. The Motley Fool has a disclosure policy. Nasdaq Recovery: 3 Artificial Intelligence (AI) Stocks That Are Still Too Cheap to Ignore was originally published by The Motley Fool
Yahoo
23-04-2025
- Business
- Yahoo
Stock Market Sell-Off: The Best Warren Buffett Stock to Buy Now
Warren Buffett is one of the most successful investors of all time, with a performance that easily surpasses the S&P 500's average. His holding company, Berkshire Hathaway, presents a valuable snapshot of the companies he believes in. Below, I'll explore why e-commerce giant Amazon (NASDAQ: AMZN) could make an excellent long-term pick in this uncertain macroeconomic environment. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » While Warren Buffett is a hugely successful investor, he isn't infallible. Berkshire Hathaway passed on the opportunity to bet on Amazon when it was just a start-up in 1994, and again when the stock went public in 1997 at just $18 per share ($0.075, adjusted for stock splits). Buffett finally pulled the trigger in 2019 and now owns roughly $1.7 billion in shares. In the past, Buffett may have seen Amazon as a speculative business with an uncertain future. However, the company now aligns more closely with his conservative investment strategy thanks to its deep economic moats, which are the competitive advantages it has over rivals in several different industries. Amazon's biggest advantage may be its sheer scale. The larger a company becomes, the easier it is for management to take advantage of efficiencies to reduce costs and pass on savings to customers. It also creates a network effect, as more customers attract more merchants and a wider variety of items. This, in turn, attracts even more customers. Amazon's scale advantages aren't limited to just e-commerce. The company is also a leader in cloud computing through Amazon Web Services (AWS), which holds a 30% global market share. In recent years, it has leveraged this to become a leader in generative artificial intelligence (AI) by allowing clients to access computing power for running and training large language models (LLMs) within AWS. While investors shouldn't expect Amazon stock to repeat the 675% gain it achieved over the past decade, the company can maintain its market-beating performance over the long term due to its strong fundamentals and reasonable valuation. First-quarter revenue jumped 10% year over year to $187.7 billion, driven by particular strength in AWS, which is benefiting from rising demand for AI-related workloads. It's unclear how this business will play out over the long term. However, Amazon is investing heavily in the opportunity by buying more of Nvidia's AI chips. It also builds custom chips called Trainium and Inferentia, which are designed to reduce the company's dependence on third parties and run specific workloads more efficiently than one-size-fits-all solutions. The best thing about Amazon's AWS-led growth is its higher profitability, compared to e-commerce. Fourth-quarter operating income jumped 61% to $21.2 billion, with approximately half of the total coming from the AWS segment. Amazon is working to boost profitability across its businesses by implementing cost-cutting measures. It aims to slash around 14,000 managerial positions this year, aiming to save between $2.1 billion and $3.6 billion annually. Amazon's biggest near-term challenge may come from macroeconomic uncertainty. The Trump administration's on-again, off-again tariffs could cause consumer prices to rise temporarily, potentially hurting demand. Furthermore, the unpredictable policy will make it hard for companies to plan their supply chains and make investments for the future. That being said, Amazon's growing reliance on AWS, its cloud computing segment, shields it from much of this tariff-related uncertainty. Furthermore, with a forward price-to-earnings multiple (P/E) of 26, the company's valuation appears to account for much of these fears. While shares are pricier than the Nasdaq-100 estimate of median of about $24, Amazon deserves a premium due to its deep economic moat and impressive bottom-line momentum. It's easy to see why Warren Buffett is a fan. Before you buy stock in Amazon, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Amazon wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $532,771!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $593,970!* Now, it's worth noting Stock Advisor's total average return is 781% — a market-crushing outperformance compared to 149% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of April 21, 2025 John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, and Nvidia. The Motley Fool has a disclosure policy. Stock Market Sell-Off: The Best Warren Buffett Stock to Buy Now was originally published by The Motley Fool Sign in to access your portfolio
