In early 2023, I made three predictions about Amazon (NASDAQ: AMZN) stock for investors. Let's see how they turned out:
First, I predicted that Amazon's e-commerce sales would bounce back. In the three quarters reported for 2023, online sales have grown faster than in the same periods last year, so I consider this prediction a success.
Second, I predicted that Amazon would expand further into healthcare. This prediction also came true. Amazon completed its $3.9 billion acquisition of One Medical, launched RxPass, a monthly prescription service, and introduced Amazon One Medical for Prime, offering Prime subscribers access to certain healthcare services for $9 per month.
Third, I predicted that Amazon would maintain its lead in cloud computing. This prediction was also accurate. Throughout the first three quarters of 2023, Amazon held about 30% of the market share on average, with Microsoft at 25% and Alphabet's Google Cloud at 9%.
As a bonus prediction, I suggested that Amazon stock would rebound from its historic lows, which turned out to be correct. After losing half its value in 2022, Amazon stock surged by 81% in 2023, making it one of the top performers among big tech companies.
I was correct in all three of my predictions and scored in the bonus round as well, although these outcomes seem obvious in hindsight. Let's see if I can continue this streak with three predictions for 2024:
Amazon's Cloud Growth Will Pick Up Again
While Amazon remained the leader in cloud services, its growth slowed down. Since reaching its peak in the fourth quarter of 2021, year-over-year growth has decreased with each subsequent quarter. This slowdown is not surprising, considering the economic downturn around that time, with the economy only recently recovering. In the third quarter, Amazon Web Services (AWS) finally stabilized, matching the 12% growth it achieved in the second quarter. I predict that this growth will continue to stabilize before picking up speed and increasing in 2024, driven by a recovering economy.
Amazon's Artificial Intelligence (AI) Will Emerge as a Major Player
This prediction is closely related to the first one. Despite the improving macroeconomic conditions, last year's stock market recovery was uneven. The companies that benefited the most were those that could take advantage of advancements in generative AI. While Microsoft and Alphabet were in the spotlight, releasing generative AI tools on their platforms, Amazon was not as visible in this space. This led some to believe that Amazon was lagging behind in the AI race, a perception that still lingers. Amazon is working to change that. Last year, the company introduced Amazon Q, its own generative AI-powered digital assistant, designed to boost productivity among AWS cloud users. Q uses company-specific sources to answer questions, create content, and streamline various tasks. AWS also offers a range of generative AI models through Amazon Bedrock and provides access to Nvidia's latest AI chips, the H200 Tensor Core graphics processing units. It's important to remember that we are still in the early stages of generative AI, as this technology has only been public for about 14 months. There is still plenty of time for Amazon to make its mark, and as the largest cloud provider in the world, it is well-positioned to do so. Not only will Amazon's cloud growth pick up again, but the company will also become a significant player in generative AI, with AWS leading the way.
Amazon Will Join Microsoft and Apple in the $2 Trillion Club in 2024
Despite rising by 81% in 2023, the factors mentioned earlier suggest that there is still room for growth for Amazon. Additionally, the company's e-commerce platform, which has struggled due to high inflation, remains a dominant force. Furthermore, Amazon is making strides in digital advertising, with ad sales growing by 23% to $32.2 billion in the first nine months of 2023, outpacing the growth of its main competitors, Alphabet and Meta Platforms, which grew by 4% and 13% respectively. Amazon's continued dominance in e-commerce and cloud computing, combined with its growing presence in digital advertising and generative AI, will drive strong financial performance, leading to further gains in its stock price in 2024 and pushing its market cap above $2 trillion.
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