Amazon (AMZN) hasn’t performed as well as some investors had hoped recently. Over the last five years, its stock has increased by only 34%, which is considerably less than the 90% growth seen with the S&P 500.
Even though Amazon’s recent financial performance hasn’t been outstanding, there’s still plenty to be optimistic about regarding its future. Here’s a look at why Amazon could be a solid investment for the long term, and potentially even help you achieve financial independence.
1. It’s making big investments in AI
Amazon Web Services (AWS) is currently the most popular cloud computing provider, holding 30% of the market. Microsoft follows with 20%, and Google has 13%. While Microsoft has been gaining ground, Amazon is investing heavily in artificial intelligence to maintain its leading position.
The company invested $34 billion in the second quarter, primarily to grow its cloud services, and is projected to spend as much as $100 billion this year. This significant investment in building state-of-the-art data centers is crucial for leading in the development of artificial intelligence and could give the company a competitive edge.
This investment seems worthwhile, given that Amazon Web Services (AWS) is highly profitable with a 33% operating margin and earned $10.2 billion in operating income last quarter. Plus, the market for AI cloud computing is projected to be worth $2 trillion by 2030, offering Amazon significant opportunities for growth in this area.
2. It’s still the e-commerce king
As someone who keeps a close eye on the stock market, it’s amazing to see how Amazon continues to lead the e-commerce world, even with so much more competition these days. They still control a huge 40% of the U.S. market, which is incredible. While Walmart is their biggest competitor at 13%, Target only has a small piece of the pie at around 2%. It really highlights just how dominant Amazon remains.
The company’s success is largely due to its Prime membership program. Prime members enjoy benefits like quick, free shipping, access to streaming videos and music, and photo storage, among other things. Current estimates show there are 240 million Prime members worldwide.
Amazon Prime members are valuable customers, spending an average of $1,170 each year – more than double the amount spent by customers who don’t have a Prime membership, according to research from Consumer Intelligence Research Partners.
3. Its advertising business continues to impress
While often underestimated, advertising is a rapidly growing part of Amazon’s business. In the last quarter, ad sales jumped 23% to reach $15.7 billion.
Amazon is now a major player in U.S. advertising, ranking third behind Google (Alphabet) and Facebook (Meta). They’re expected to control around 17% of the digital ad market next year, a significant increase from less than 11% in 2021. With U.S. digital ad spending projected to reach $429 billion by 2029, Amazon’s success in this area will likely be crucial for the company in the years ahead.
Will buying Amazon set you up for life?
Investors who held onto Amazon stock for many years have seen incredible returns – it’s increased by 2,800% in the last 15 years. However, it’s unlikely the stock will grow at the same rate over the next 10 years.
Despite recent performance, Amazon remains a strong investment option. It’s still the leader in cloud computing, is just starting to invest heavily in AI, and is making gains in the advertising market. This combination suggests Amazon could significantly improve your portfolio over the next few years, even if it won’t guarantee financial independence.
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2025-10-12 02:17