As the market declines this year, investors might be thinking more about Warren Buffett’s legendary advice. After all, when the market goes up, it’s easier to think you’re an excellent stock picker. When the market declines, however, it can be humbling and convince growth investors that there’s more to investing than putting your money into the next big artificial intelligence (AI) winner.
But even Berkshire Hathaway doesn’t strictly stick to value stocks and has exposure to AI through some of its tech stocks. One of Buffett’s firm beliefs is that the market will do well over time. Your growth stocks may be down today, but if you’ve done your due diligence and determined that these stocks have excellent long-term potential, you should hold tight and wait for the rebound.
Consider Amazon (AMZN 0.63%). It’s one of Berkshire Hathaway’s few tech stocks, but Buffett didn’t sell any of it in his recent sell-off. It has huge potential and could soar this year and for years ahead.
E-commerce is increasing
Amazon is the leader in U.S. e-commerce by far and is taking action to maintain that. It continues to ramp up delivery times and invest in robots and AI to become faster and more efficient.
The company is also focusing on being everything to everyone and making sure Prime members can count on it for an increasing number of their purchases. It increased same-day delivery regions by 60% in 2024, which are now 140 metro areas, and had record delivery times. According to one study, it came in on top for the cheapest holiday sales prices, averaging 14% lower than other online retailers.
Amazon spent the past few years revamping its fulfillment network to get more products to customers faster and at a lower cost. First it switched from a national to a regional warehouse model, cutting down the “last mile” piece of delivery, which is the most expensive. Now it’s turned to reshaping its inbound networks to have more products placed for final delivery in its regional warehouses.
This sets the company up to benefit from a continued shift to e-commerce. Even though it seems like everyone is buying digitally these days, e-commerce remains a fraction of overall retail sales — about 17% in 2024. That’s expected to reach 21% by 2029, according to Statista, or $5.9 trillion, which is still just a fraction of the total.
Amazon doesn’t have all the tools to meet today’s needs, believe it or not. Trends are in omnichannel, and although the company has attempted in many ways to get into physical retail, it doesn’t have a strong brick-and-mortar setup. Instead, it seems to be veering away from focusing efforts on expanding a physical footprint and doing what it does best — online sales — even better.
AI is exploding
Of course, everyone is talking about Amazon’s developments in its generative AI toolset. It offers a huge assortment of services for its Amazon Web Services (AWS) cloud clients, and management envisions tremendous opportunities here. CEO Andy Jassy said, “It’s hard to overstate how optimistic we are about what lies ahead for AWS’ customers and business.”
He sees a future not too far off where generative AI features are embedded into every application that’s built, and Amazon is creating a full infrastructure to be a part of that. It offers three layers of services to meet demand across the spectrum for need and budget, from tools for developers to create their own large-language models (LLMs) to the ability to use Amazon’s LLMs to build generative AI applications to plug-in services for smaller businesses. These solutions run the gamut of generative AI capabilities, like coding through prompts to creating full marketing campaigns.
Amazon is investing more than $100 billion on its AI business this year and clearly expects it to pay off in a big way. It’s already a multibillion dollar run-rate business, but management is still expecting a huge shift and is positioning itself to gain from that shift.
Amazon is cheap
One reason Amazon can soar this year is that its stock is down right now, giving it more room to climb back up. It’s down 12% this year and trades at a forward one-year price-to-earnings ratio (P/E) of 25. That’s an excellent deal for a stock with as much opportunity as Amazon.
If the economy continues to be volatile, the company’s stock might stay lower for now. However, as things calm down, Amazon could soar in 2025. Over the long term, the company still has a huge growth runway.
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