To The Moon

$Amazon.com(AMZN)$  

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.

Since 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, below are the 3 compelling reasons why AMZN stock looks like a strong buy in current 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.

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 benefits everyone: (1) Amazon, (2) its selling partners and (3) the 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.

Coming AI Innovations.

Amazon’s teams utilized a generative AI system incorporating a Multi-Modal Large Language Model (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 example, 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 example, when a partner mistakenly labels a product with the wrong size, Amazon would notify them to prevent future errors. 

Fast Growing Business.

Amazon’s main profit driver is its Amazon Web Services (AWS), its world #1 cloud-computing segment, which generated $24.6 billion in operating income in 2023, comprising 66% or 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 did not 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.

- International turned to $903 million (profit) from a -$1.2 billion loss. 

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

My viewpoints: (mine only) 

Amazon’s YTD performance is mixed, it is not the best - that belongs to $NVIDIA Corp(NVDA)$  .

Neither is it the worst faring of the bunch, that accolade belongs to none other than - talk, talk, talk $Tesla Motors(TSLA)$  .

For the moment, it is ranked 4th best performing Mag 7 YTD in 2024.

Looking at above InvestorPlace’s posting, the foundation layer of getting AI off the ground, that means the semiconductor chips, the data centre, the infrastructure, has been laid.

Going forward for this basic building block, it is about scaling its efficiency and resiliency - better, faster and more resistant to hacking.

Looking at Amazon’s endeavour, I say the next phase of Artificial Intelligence (AI) Cycle, has started kicking in and that is usage and application of AI.

This is where the real values of AI lies.

Any company that is able to harness the AI application layer capabilities will reap the benefits that comes with it, translating into cost savings, less error and time spent on rectifications etc..

It may and I think it is every company’s wish to rely less on human labour (manpower) and more on machine “intelligent” operations to keep the company running.

Best of all, it could be scaled to 24x7 where required versus employing human on recurring costs overhead (salaries) and restrictive hours (welfare and time off).

Is there anything not to like about Amazon’s three AI applications implementation, especially when it could mean bigger profits by 2025 quarterly earnings announcement ? 

Do you think Amazon is heading in the right direction with its AI implementation ?

Do you think we will see the beneficial results of the 3 AI projects by Q1 2025 earnings reporting ? 

If you find this post interesting, give it wings! ️ Repost and share the insights ?

Do consider “Follow me” and get firsthand read of my daily new post. Thank you.

@Daily_Discussion

@TigerPM

@TigerStars

@Tiger_SG

@TigerEvents