📈 AMZN Hits $2 Trillion

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This week, Tesla's delivery numbers are electrifying the market, and we're spotlighting two stocks down 74% and 57.5% that are ripe for recovery. Bitcoin's starting the second half strong above $63,000, and our ultimate guide to Bollinger Bands is a must-read. Amazon just hit the $2 trillion milestone, driven by groundbreaking AI advancements. Stay tuned for a huge announcement coming this July 4th—keep your inbox ready for an email from me later today.

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I can't reveal all the details just yet, but if you're aiming to become a better trader or seeking an edge in the market, make sure to check your inbox this Independence Day for an email from me.

Trust me, you won't want to miss this…

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📰 What’s Happening Today?

Amazon Hits The $2 Trillion Milestone

Amazon just hit a historic high, joining the elite $2 trillion club alongside tech giants like Microsoft, Apple, and Nvidia. This milestone is a testament to Amazon's growing profitability and significant advancements in artificial intelligence (AI). But what does this mean for investors? Let's break it down and see why Amazon’s stock is on the rise and what could be next for the e-commerce titan.

Unpacking Amazon’s AI Revolution

Amazon’s evolution from an e-commerce platform to an AI powerhouse is pretty amazing. While online sales still drive substantial revenue, it's Amazon Web Services (AWS) and its AI innovations that are truly propelling the company forward.

• AWS Innovations: AWS is not just the world's largest cloud platform; it's a frontrunner in AI technology. Amazon’s custom-designed chips for AI model training and inferencing are gaining traction, offering cost advantages and easing supply constraints faced by other data centers, as detailed in The Motley Fool.

• AI Layers: AWS's three core AI layers—custom chips, large language models (LLMs), and application-ready AI software—are pivotal. The AWS Bedrock platform, for instance, includes Amazon’s own Titan LLMs and models from top AI start-ups like Anthropic.

• E-commerce Integration: AI is also revolutionizing Amazon’s legacy business. From enhancing recommendation engines to improving product listings, AI tools are boosting both customer engagement and sales.

Financial Muscle and Market Dynamics

Despite being a latecomer to the $2 trillion club, Amazon generates more revenue than any of its peers in this elite group. Here's how its financials stack up:

• Revenue and Profitability: Amazon's trailing-12-month revenue stands at a staggering $590 billion. However, its valuation has lagged due to modest profitability. The AWS division is a bright spot, contributing 61.5% of the company’s operating profit despite making up just 17.5% of its revenue.

• Strategic Cost Reduction: Amazon’s strategic move to split its U.S. fulfillment network into eight regions has significantly cut logistics costs. This change helped the company shrink its cost to serve globally for the first time since 2018, according to Forbes.

• Profit Surge: In Q1 2024, Amazon’s net income soared to $10.4 billion, a 225% increase year-over-year. Faster deliveries and increased customer orders, especially among Prime members, are key drivers of this growth.

The Road Ahead: More Than Just $2 Trillion

Analysts believe that Amazon's $2 trillion milestone is just the beginning. Several factors could propel the company even higher:

• Improving Valuation Metrics: Amazon’s current price-to-earnings (P/E) ratio of 54.1 is higher than its $2 trillion club peers. However, with Wall Street projecting $5.41 per share in earnings for 2025, Amazon's forward P/E ratio could drop to 35.7, suggesting a potential 20% stock price increase.

• AI Investments: Amazon’s recent $4 billion investment in Anthropic underscores its AI ambitions. This partnership could attract more customers to AWS and shift market dynamics in favor of Amazon over competitors like Microsoft Azure, as highlighted by Investor's Business Daily.

✍ TL;DR

Amazon Story:

• Historic Milestone: Amazon hits the $2 trillion market cap, joining the elite club with Microsoft, Apple, and Nvidia.

• AI Revolution: Amazon’s shift from e-commerce to AI powerhouse boosts growth.

• AWS Innovations: Leading in cloud and AI with custom chips and large language models.

• E-commerce Boost: AI enhances customer engagement and sales in traditional business.

• Financial Strength: Generates more revenue than peers, with AWS contributing 61.5% of operating profit.

• Strategic Cost Cuts: Split U.S. fulfillment network reduces logistics costs.

• Profit Surge: Q1 2024 net income rises 225% YoY to $10.4 billion.

• Future Potential: Analysts expect further growth with improving valuation metrics and significant AI investments.

Stay ahead, stay informed, and most importantly, stay profitable.

‘til next time,

TradingLab