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There’s no doubt that 2022 will go down in history as one of the toughest years on record for Wall Street, but markets appear to have turned the corner. After tumbling more than 35% in 2022, the Nasdaq Composite has rebounded with a vengeance, gaining 39% thus far in 2023 (as of market close on Tuesday).
Investors who are students of history will know the surge will likely continue. As far back as 1972 — the first full year of trading for the Nasdaq — in the year following a market rebound, the tech-heavy index has generated gains of 19% on average, which suggests the current rebound will likely continue.
Furthermore, the resurgence of stock splits in recent year has investors taking a fresh look at companies that have split their shares, as the move is usually preceded by years of robust growth. One such company is Amazon (NASDAQ: AMZN). The stock has gained 677% over the past decade, causing the company to split its shares in mid-2022.
Despite recent challenges, Amazon has a history of strong performance, and the coming year will likely be no different.
Late to the AI race or decades early?
Demand for generative artificial intelligence (AI) has spread like wildfire over the past year or so, with many businesses scrambling to adopt these sophisticated algorithms to reap the expected productivity windfall. These AI models have been used to draft and summarize emails, search and condense content, mine data, generate original content, and even write computer code, all of which saves users time and makes them more productive.
There’s been a lot of talk about how Amazon was late to recognize this shift and the accelerating demand for the technology, an uncharacteristic and costly miscalculation. It’s further been suggested that this allowed competitors to get the jump on Amazon, but this belies decades of evidence to the contrary.
Amazon has implemented AI in a broad cross-section of its operations over the years. It uses AI to make product recommendations to customers, to predict inventory levels necessary at its warehouses and distribution centers, to help stock and ship products (with AI-powered robots), and even to set up the most efficient routes for deliveries.
Perhaps most central to the company’s efforts is Amazon Web Services (AWS), which has long provided a host of AI offerings to its cloud computing customers.
Suggesting Amazon is late to the AI party defies logic, and recent developments suggest the company is putting its years of expertise in the field to good use.
Amazon’s far-reaching strategy
Recently, AWS announced the general availability of Bedrock, a service that gives cloud customers access to all the top generative AI models, including those developed by AI21 Labs, Anthropic, Cohere, Meta Platforms, and Stability AI, among others.
Then, of course, there’s Amazon’s own Titan, which offers a family of AI models that have been trained by AWS, supporting a variety of use cases. For example, Titan Image Generator can create original images using voice prompts, much like OpenAI’s DALL-E. These offerings provide cloud users with everything they need to develop their own AI applications, helping bring AI to the masses.
Just last month, Amazon revealed that it would provide access to Nvidia‘s latest state-of-the-art AI chips — the H200 Tensor Core graphics processing units (GPUs). Amazon also announced its new, more energy-efficient Trainium2 and Graviton4 AI processors. This will give its cloud infrastructure customers access to a wide range of AI choices, from the top of the line to more cost-effective options. The company also debuted Amazon Q, a generative AI-powered assistant designed to help automate and streamline mundane and time-consuming tasks for enterprises.
Its cloud unit aside, Amazon is providing generative AI tools to merchants on its e-commerce platform to help create accurate product listings while also debuting AI-powered image generation for customers advertising on its e-commerce platform. Amazon is also deploying generative AI to improve customer purchase recommendations and the search process. Finally, Amazon has taken a page from Microsoft’s own AI playbook, taking a $4 billion minority stake in AI start-up Anthropic — a rival to OpenAI — to further expand its AI chops.
The evidence shows that Amazon is using the next generation of AI to maintain or even improve the competitive advantages in its industry-leading businesses.
All that potential at a bargain
Despite the stock’s significant gains this year, Amazon offers a great deal of opportunity for a surprisingly reasonable valuation. The stock is currently selling for roughly 2.4 times forward sales, a significant discount to its seven-year average of 3.5 times sales.
This gives savvy investors the opportunity to buy all the potential Amazon has to offer at a discount.
Should you invest $1,000 in Amazon right now?
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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. 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. Danny Vena has positions in Amazon, Meta Platforms, and Nvidia. The Motley Fool has positions in and recommends Amazon, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.
History Says the Nasdaq Will Surge in 2024: 1 Stock-Split Stock to Buy Before It Does was originally published by The Motley Fool
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