On the heels of 2022's historic downturn, investors finally have reason to celebrate. The S&P 500 has gained more than 20% from its bear market low last year, though it's currently gathering steam before its next leg up. The index is poised just 13% below its all-time high (as of this writing). When it ultimately exceeds that watermark -- which is only a matter of time -- that will be proof positive of the onset of the next bull market.
The still-fluid economic picture presents challenges, particularly for consumer-facing businesses. One example is online retail, as hesitant shoppers wait for more clarity about the future. E-commerce pioneer Amazon (NASDAQ: AMZN) is still feeling the impact, as the stock is still 35% off its high and down 24% over the past three years.
This represents a compelling opportunity for savvy investors. A recovery in consumer spending, the massive opportunity afforded by AI, and a dirt-cheap stock price suggest investors should be buying the stock hand over fist before the oncoming bull market charges ahead.
Image source: Getty Images.
Was Amazon late to the AI race?
The emergence of generative AI this year caught many by surprise. These next-generation algorithms have the ability to increase productivity by drafting and summarizing emails, searching and condensing content, mining data, and even writing code, among many other use cases. This vast potential has companies clambering to determine how best to profit from this next-generation technology.
Microsoft was among the first to publicly stake a claim in the space, with its $13 billion investment in ChatGPT creator OpenAI. The company was quick to integrate AI tools into its most popular products and services, a strategy that appears to be paying off. Alphabet also moved quickly to develop its own large language models, which form the foundation for generative AI.
While its cloud rivals hogged the spotlight, Amazon was working quietly behind the scenes, content to be thought of as somehow "late" in the AI race. A quick look under the hood shows that perception is misguided.
At the forefront of AI adoption
A quick look into Amazon's history shows the company has been developing and integrating AI into its e-commerce operations for years. Examples include the purchase recommendations it makes to shoppers, inventory controls at its distribution centers and warehouses, the autonomous robots that help fulfill orders for packing and shipping, and even the automated system that plans routes for delivery drivers.
The elephant in the room, of course, is Amazon Web Services (AWS), which has long provided access to AI tools and services for its cloud infrastructure customers.
Another example hiding in plain sight is Alexa, Amazon's voice-controlled virtual assistant that inhabits its Echo smart speakers, viewers, and other devices. The company still controls the space it pioneered -- with 28% of the market -- despite the emergence of numerous rivals over the past decade. The company recently revealed that Alexa is embedded in "over 100 million devices," including Amazon's namesake products and those of third-party manufacturers.
Furthermore, the same algorithms that recommend products on its website also surface options for Amazon Music listeners and Amazon Prime viewers.
So, the notion that Amazon is somehow "behind in AI" is ludicrous on the face of it.
What Amazon is doing now
Just because Amazon isn't chasing the spotlight doesn't mean it has no plans for generative AI.
Reports suggest the company is planning a major overhaul of the search feature for its e-commerce site, layering in a generative AI component to surface more relevant responses and support product comparisons and recommendations from "experts."
Amazon is tapping generative AI capabilities that will allow sellers to generate product descriptions and summarize and collate product reviews. The company is also developing a tool that will root out fake customer reviews while surfacing and promoting the genuine article.
Finally, the company recently announced the general availability of Amazon Bedrock, a service that helps AWS customers choose between building their own generative AI applications or using existing AI models, with the ability to integrate their proprietary data while protecting the privacy and security of that data.
A screaming buy
In addition to the ongoing recovery of its online retail and expanding profitability, Amazon's position as the leader in cloud infrastructure services provides a captive audience for its generative AI offerings.
While Amazon is already up 44% so far this year (as of this writing), the aforementioned catalysts could lift the stock even higher. Yet, even as opportunity abounds, it's still remarkably cheap, selling for just 2 times sales. That's outrageously inexpensive for a company that's an industry leader in not one but two industries -- e-commerce and cloud infrastructure services.
Given the improving economic environment, the opportunity afforded by AI, and the dirt-cheap stock price, investors should be buying Amazon stock hand over fist before the new bull market charges ahead, leaving them in the dust.
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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, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
