To The Moon

$Amazon.com(AMZN)$ Amazon stock has been flying this year and is currently trading near an all-time high.

Questions are arising about whether this e-commerce and cloud giant’s growth is already factored into its price.

Let’s dive into the company’s AI catalysts and what could propel this stock higher from here.

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In this bull market, Amazon stock remains one of the best companies to invest in.

A Magnificent 7 giant, Amazon’s dominant presence in the world of e-commerce and cloud computing position the company well to take advantage of ongoing secular growth trends.

From an AI perspective, key integrations into the company’s existing operations can provide the kind of operating leverage growth investors are looking for.

In addition to key cost efficiencies which have been gained as the company reduces its capital expenditures over time, that’s a recipe for major cash flow growth.

Some companies are essentially valued as the discounted value of all future cash flows, that’s a great thing for long-term investors.

With that said, let’s dive into three reasons why AMZN stock looks like a strong buy in this environment.

Project P.I. and AMZN Stock

In Amazon fulfillment centers across North America, the company’s AI model “Project P.I.” is scanning millions of products daily for defects.

Using generative AI and computer vision, it detected issues like damage or incorrect colors and sizes before shipping to customers.

Additionally, Project P.I. identified root cause issues, enabling preventive measures to avoid future issues.

Before shipping, items at Amazon travel through imaging tunnels where Project P.I. used computer vision to detect defects, like bent book covers.

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If a defect was found, Amazon isolated the product for further investigation. The company also associates then determined whether to resell, donate, or repurpose flagged items.

The model enhanced manual inspections and was set to expand to more sites in 2024.

Amazon’s management team has placed significant emphasis on the importance of perfecting customer experience.

With AI, Amazon can provide such through using it in detecting products before they send it out. This will benefit everyone: Amazon, its selling partners, and their customers.

In a word, Project P.I. has exemplified Amazon’s customer-centric approach and its commitment to integrating AI innovations to tackle climate change.

More AI Innovations to Come

Amazon’s teams utilized a generative AI system incorporating a Multi-Modal LLM to delve into the origins of customer complaints.

The company will employ customer feedback, images from Project P.I., and other data sources to pinpoint issues and enhance the system iteratively. 

For instance, if a customer reported receiving the wrong-sized sheets, the system will cross-check the complaint with fulfillment center images to ascertain discrepancies.

Amazon’s technology is set to aid its selling partners by streamlining access to defect data.

For instance, if a partner mistakenly labels a product with the wrong size, Amazon would notify them to prevent future errors. 

Business is Growing Fast

Amazon’s main profit driver is AWS, its cloud-computing segment, which generated $24.6 billion in operating income last year, comprising two-thirds of the total.

AWS’s 2023 operating margin of 27.1% far surpasses the 4% margin of its North American retail segment. Notably, these results overshadow the fact that Amazon’s international retail segment didn’t turn a profit last year.

In Q1, Amazon’s North America and international segments saw robust sales growth, while profitability surged, driven by higher unit sales and advertising revenue.

Operating income for North America soared to $5 billion from $898 million, and international turned a $1.2 billion loss into a $903 million profit.

With advertising services growing consistently at over 20%, Amazon’s ad business holds significant potential as a major profit center in the future.