It's been an interesting couple of years to be an investor. After suffering the worst stock market plunge in over a decade, the major market indexes have come roaring back, each gaining more than 20% from their respective lows. This has many market watchers declaring the arrival of the next bull market, at least by that one measure.
While some stocks have already recovered from their bear market shellacking, others are still struggling to regain their former glory. As an example, many stocks in the e-commerce industry are still deep in the red. Online retail pioneer Amazon (AMZN 0.33%) is one such stock, still trading down 25% off its high and down 12% over the past three years.
Yet a rebound in consumer spending, potential gains from AI, and a bargain basem*nt stock price suggest now is the time to buy Amazon stock hand over fist before this bull market charges forward.
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The popular -- but flawed -- narrative on Amazon
The debut of OpenAI's ChatGPT late last year cast the spotlight on artificial intelligence (AI) and more specifically generative AI, which sparked a mad rush to adopt this breakthrough technology. The ability of these advanced algorithms to search and summarize content, draft emails, and even write code promises a host of productivity gains and enhancements.
Many stock market pundits declared that Microsoftand Alphabet are now the frontrunners in the race to dominate AI. While this view is understandable, it's also flawed.
Microsoft made a well-publicized $13 billion investment in ChatGPT creator OpenAI and began integrating generative AI into a broad cross-section of its products and services. Alphabet's Google quickly responded by debuting Bard, its conversational agent, while also integrating AI across its portfolio. No immediate corresponding announcement by Amazon led some to conclude that the company is somehow "behind" in the AI arms race. The evidence suggests otherwise.
Amazon has a long history of AI
A quick look at Amazon's past shows that the company has long been at the forefront of AI adoption.
The company pioneered various forms of AI to orchestrate its e-commerce empire. This includes surfacing recommendations for customers, setting inventory levels at its warehouses, using AI-controlled robots that assist with packing and shipping, and planning routes for deliveries. Amazon also uses AI to target ads to users of its online shopping site.
Let's not forget Amazon Web Services (AWS), which offers a host of AI functionality to users of its cloud infrastructure services.
There's more. In late 2014, Amazon introduced Alexa, the AI-fueled virtual assistant that powers its Echo line of smart speakers and other devices. The company quickly cornered the market, and while rivals launched competing products, Amazon is still the leader, with nearly one-third of the market. Alexa is integrated into more than 100 million Amazon and third-party devices.
Amazon Music listeners and Amazon Prime viewers have also benefited from recommendations surfaced by the company's AI algorithms.
What Amazon is doing now
Amazon isn't content to rest on its laurels and is hard at work developing its next generation of AI functionality. The company is developing an entire line of custom processors to speed data through its data centers and cloud computing operations.
AWS recently announced the availability of its generative AI service named Bedrock. CEO Andy Jassy noted that creating the large language models (LLMs) that power generative AI is out of reach for most companies. In a recent interview on CNBC's Squawk Box, Jassy said that the "really good" LLMs cost "billions of dollars" and take "many years" to train, which most businesses can't afford. Creating generative AI tools and making them available via AWS gives the company the same upside as its cloud computing rivals.
Most recently, Amazon introduced new features that use generative AI to help sellers create product descriptions and summarize product reviews on its website, and it has plans to use AI to combat fake customer reviews and promote real ones.
Amazon stock is a screaming buy
A recent rebound in its e-commerce business and expanding profitability helped restore investor confidence, pushing the stock up 65% so far this year, yet even after a significant move higher, Amazon stock sells for a song. The stock trades for just 2 times next year's sales, for a company that's an industry leader, not only in e-commerce, but also in cloud infrastructure services.
Given the ongoing economic rebound, the potential benefits of AI, and the deeply discounted price, now's the time to buy Amazon stock hand over fist, before Wall Street comes to its senses.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena has positions in Alphabet, Amazon.com, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon.com, and Microsoft. The Motley Fool has a disclosure policy.
