3 Reasons to Buy Amazon Stock Like There's No Tomorrow

Amazon (NASDAQ: AMZN) recently topped $2 trillion in market cap for the first time. It wasn't that long ago that it surpassed $1 trillion, and it might not be too long before it gets to $3 trillion. That implies a gain of 50% on Amazon's current stock price, which is already up 27% this year, and it has strong growth drivers.

Here are three reasons investors should consider buying shares right now.

1. Its opportunities in cloud computing

When ChatGPT burst onto the scene almost two years ago, Amazon didn't take too long to follow up with announcing its own investments in generative artificial intelligence (AI). It has since launched a blitz of AI services taking its cloud services division, Amazon Web Services (AWS), to a whole new level.

Amazon's generative AI falls into three categories that are meant to target the full gamut of AWS clients. Large companies with tons of their own data and resources can create their own foundation models (FM), which are the foundation of generative AI. They're trained on so much data that they begin to "generate" and appear creative, hence the name.

Companies that don't have as much of a need for customization can use Amazon's FMs and large-language models (LLM). And clients that rely on tech software or support instead of on-site developers can use several applications that Amazon has built for smaller companies.

For example, many clients, including big names like Datadog and Toyota Motor , are using Amazon Q, which creates and tests codes, transfers code between languages, and generally follows coding instructions.

The opportunities here look endless. Management has said that customers are finally nearing the end of their cost-optimization efforts, which have led to a deceleration in AWS sales growth.  And between larger budgets and Amazon's cutting-edge AI developments, AWS should be able to grow its lead in cloud computing. Expect more exciting developments in this area.

2. A shift in advertising

Advertising is going through some major shifts away from traditional media like print and broadcast television toward digital media and ad-supported streaming.

A modern iteration of advertising is the company's work with third-party vendors. Not only do they pay a slice of their earnings to Amazon for hosting their products and often fulfilling their deliveries, but they can also increase their chances of being found and making a sale by paying Amazon even more money to feature their products in different ways.

This is another way Amazon is benefiting from its investments in AI. It offers third-party vendors the unmatched opportunity to leverage its platform and data to reach buyers for their products. Amazon recently joined Netflix and Walt Disney in launching an ad-supported streaming tier, and it's using the same advertising model that it uses on its website to make money through streaming .

Advertisers are clearly buying in. Advertising has been Amazon's fastest-growing segment for a while, even though advertisers as a group have been pulling back on spending in general. Ad sales increased 24% year over year in the 2024 first quarter. It's also a high-margin business that contributes to profitability.

3. Don't forget e-commerce

With all the talk about generative AI, it could be easy to forget that e-commerce still accounts for the bulk of Amazon's business. And it's not taking that lightly.

Management continues to upgrade its delivery and logistics system with improved fulfilment capabilities, like its new regional fulfillment network, which it changed from a national network last year, and robotics that can handle quick and precise activity.

It's also using its large data stores and AI to improve speed. In the first quarter, almost 60% of orders in the top 60 U.S. metropolitan areas were delivered within 48 hours, and that number reached up to 75% for some international locations like London and Tokyo.

It's still working out best plans for the new regional network and expects it to become even more efficient over the next few years. As customers get more orders faster, they turn to Amazon for more of their essentials, reinforcing and expanding its lead in global e-commerce.

The future looks very bright right now for Amazon in both the near term and the long term. Don't think too long about how much the stock will grow this year or whether it can reach a $3 trillion market capitalization. Buy and hold -- and thank yourself later.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jennifer Saibil has positions in Walt Disney. The Motley Fool has positions in and recommends Amazon, Datadog, Netflix, and Walt Disney. The Motley Fool has a disclosure policy .