If I Could Buy Only 1 Artificial Intelligence Stock Over the Next Year, Amazon Would Be It, but Here's the Key Reason
The author highlights Amazon (AMZN) as the top artificial intelligence stock to buy, primarily due to its Amazon Web Services (AWS). Despite representing less than 20% of Amazon's revenue, AWS accounts for 63% of its operating income. The global cloud computing market is projected to triple by 2030, potentially increasing AWS revenue from $107.6 billion in 2024 to $342 billion by 2030, which could significantly boost Amazon's operating income and stock returns.
There are some excellent artificial intelligence (AI) stocks you can buy right now. However, my favorite -- and largest AI play in my own portfolio -- is Amazon (AMZN -0.08%).
To be sure, there are a lot of reasons why I like Amazon as a long-term investment. E-commerce still represents less than one-fifth of all U.S. retail, and there's massive international expansion potential for the business, just to name a few pluses. But the No. 1 reason I love the stock is Amazon Web Services (AWS) and its potential to drive profits higher over the next decade.
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Why AWS could be a massive catalyst
AWS makes up less than 20% of Amazon's revenue, but it's the fastest-growing, most profitable part of the company. Despite accounting for less than one-fifth of sales, as noted, AWS was responsible for 63% of the company's operating income in the first quarter.
However, this could be just the beginning. The global cloud computing market is expected to roughly triple in size by 2030, compared with 2024 levels. Assuming AWS simply maintains its current market share, this means that AWS revenue could rise from $107.6 billion in 2024 to about $342 billion in 2030.
If Amazon can maintain its current operating margin for AWS (it's likely the margin will improve as the business scales), this would result in about $87 billion in additional annual operating income just from AWS. This alone would likely drive excellent stock returns -- and that's on top of any value added through profit increases from the retail side.
