Amazon Strong Performance Drives Shares Up 7%
Amazon.com experienced a 7% surge in shares after reporting higher-than-expected holiday quarter sales and signaling early gains from AI-powered features in its lucrative cloud business.
Amazon, joining the ranks of tech giants like Microsoft (MSFT.O), is starting to see significant benefits from heavy investments in AI. Despite plans for additional spending in 2024 to develop this technology further, the company’s robust execution has instilled confidence in investors.
AWS Gains Traction in Gen AI
J.P. Morgan’s Doug Anmuth highlighted Amazon Web Services (AWS) experiencing a strong ramp in early Gen AI revenue. While still a small contribution to a $100 billion run-rate business, Anmuth predicts meaningful traction for AWS in Gen AI over the coming year.
With 23 brokerages raising price targets, Amazon posted a 14% rise in holiday quarter sales, reflecting strong consumer spending amid economic challenges. Analysts, including Anmuth, commend Amazon’s resilience and execution during the pandemic, foreseeing a strengthened company on the other side.
Shares, which rose by 81% in 2023, traded at $171.01, fueled by an optimistic revenue forecast. Amazon projected current-quarter revenue as high as $143.5 billion, surpassing analysts’ expectations and drawing positive reactions from the market.
Amazon Guidance Contrasts with Tech Peers
While other tech firms soften revenue ranges, Amazon’s higher-than-expected guidance sets it apart. Jamie Meyers of Laffer Tengler Investments emphasized the contrast, noting Amazon’s favorable position in providing a much higher range than anticipated.
Trading at 40.51 times its forward earnings per share, Amazon is poised to add approximately $120 billion to its market capitalization if current gains hold, showcasing sustained investor confidence.
Despite substantial investments in cloud infrastructure for generative AI, investors remain bullish. Krishna Chintalapalli of Parnassus Investments expects strong returns on investment from recent generative AI endeavors.
Read More Innovation – Tech Foom
