Shares of Amazon (AMZN) surged nearly 4% on Wednesday, closing at $193.61 and propelling the company to a market capitalization of over $2 trillion for the first time. This milestone makes Amazon the fifth U.S. company to reach this impressive valuation, joining tech giants like Apple, Microsoft, Nvidia, and Alphabet. Amazon’s stock has seen a remarkable rise, up 27.76% this year and more than 50% over the past 12 months, marking a significant V shapedrecovery from the tech downturn of 2022.
Amazon’s recent stock performance has been buoyed by several factors, including strong investor interest in artificial intelligence (AI). The company’s significant investments in AI, particularly through its Amazon Web Services (AWS) division, have positioned it as a leader in cloud computing and AI technologies. AWS, the world’s largest provider of cloud services, has seen a resurgence in growth, reporting a 17% year-over-year revenue increase in the first quarter of 2024. Additionally, Amazon’s forays into AI startups like Anthropic and robotics firm Figure underscore its commitment to harnessing AI for future growth.
Amazon’s financial performance has also played a crucial role in its stock’s ascent. In April, the company topped expectations for its first-quarter earnings, reporting $143.3 billion in revenue, up 13% year-over-year, and earnings per share of $0.98. Amazon’s two primary profit drivers, AWS and advertising, posted robust year-over-year revenue growth of 17% and 24%, respectively. This strong financial showing has reinforced investor confidence in the company’s long-term prospects.
Reaching the $2 trillion mark took Amazon more than four years since it first crossed the $1 trillion threshold in February 2020. In comparison, Alphabet reached its second trillion in 1,075 days, while Apple and Microsoft both needed 516 days. Nvidia, benefiting from the AI boom, achieved this milestone in just 180 days. Amazon’s journey, while slower, reflects steady growth driven by sustained innovation and market adaptation.
The broader market context has also favoured Amazon’s rise. Optimism around the resilience of the U.S. economy and the potential easing of interest rates from the Federal Reserve have driven up tech stocks, including Amazon. The company’s strategic investments in AI and its focus on business-oriented AI products, such as AI models and the Q chatbot for AWS customers, have positioned it well to capitalise on the AI wave.
Amazon’s strategic initiatives extend beyond AI. The company has been actively managing costs and enhancing operational efficiency. Management efforts to rein in spending, including significant layoffs affecting over 27,000 employees, have contributed to improved earnings growth. Furthermore, Amazon’s investment of $4 billion in the AI company Anthropic highlights its commitment to leading in AI development.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.
We're Live on WhatsApp! Join our channel for market insights & updates
Get the link to download the App
