Three Predictions Regarding Amazon's Share Value in 2025
Three Predictions Regarding Amazon's Share Value in 2025
In early 2024, I made three predictions regarding Amazon's (AMZN -1.71%) stock performance. Let's assess the accuracy of my predictions:
- My belief that Amazon's cloud growth would pick up pace proved to be correct. In the first three quarters of 2024, Amazon Web Services (AWS) revenue saw a 18% increase year over year, including a 19% rise in Q3. This is an improvement from the 13% growth in 2023, so this prediction goes in the win column.
- My prediction that Amazon's artificial intelligence (AI) would make significant strides appears to be coming true, although quantification remains challenging. AI Magazine honored Amazon SageMaker as one of the top AI tools of 2024, despite stiff competition from both Microsoft Azure AI and Alphabet's Google Cloud AI. I'll chalk this one up as another win.
- I was also correct in predicting that Amazon would join Microsoft and Apple in the $2 trillion club. However, I must admit partial credit because while Amazon's market cap surpassed the $2 trillion mark, both Microsoft, Apple, and Nvidia currently hold valuations greater than $3 trillion.
All three predictions turned out to be accurate, although looking back, they appear to be a slam dunk. Let's see if I can maintain this track record of seers' intuition for 2025 predictions.
1. Amazon's lead in cloud remains intact
Although some may consider this a no-brainer, the competitive landscape in cloud infrastructure services has significantly evolved in recent years. Google Cloud and Microsoft Azure have been locked in a race to be crowned the "fastest-growing" cloud service provider, with Google Cloud reporting a 36% year-over-year growth rate in the third quarter, surpassing Microsoft's 33%. AWS, however, followed closely behind with 19% growth.
CEO Andy Jassy noted that AWS has witnessed an acceleration in growth for the last four quarters. The company's annualized revenue run rate now stands at $110 billion, giving it a 33% market share of the cloud infrastructure services market—more than both Google Cloud and Microsoft Azure combined, according to research firm Canalys.
I predict that AWS will sustain its growth momentum, enabling Amazon to maintain its lead in the cloud throughout 2025 and beyond, despite the intensified competition.
2. Amazon will surpass Microsoft in AI
While Microsoft played a pivotal role in sparking the AI revolution, its accomplishment can be attributed, in part, to investments in ChatGPT parent OpenAI and its integration of AI tools across various platforms. This, in turn, spurred AI adoption, generating substantial revenue for Microsoft.
During its fiscal 2025 first quarter (September 30), Microsoft reported that its Azure Cloud growth included a 12-point boost from AI services, much like the previous quarter. Indeed, Microsoft leads the overall AI and generative AI race, according to IoT Analytics.
However, the competitive landscape is heating up, and Amazon is making moves to assert its dominance in the AI field. Jassy mentioned that AWS has released nearly twice as many machine learning and generative AI features as its top competitors over the past 18 months.
I predict that Amazon's aggressive development in AI technology will put it ahead of Microsoft in 2025, ensuring that it maintains its position as a leading force in AI.
3. Amazon's e-commerce business sees profitable growth
Jassy has emphasized increasing Amazon's profitability through cost reduction and optimizing its logistics and fulfillment centers. The company is implementing strategic changes, such as moving items closer to end customers, which reduces shipping costs. Additionally, Amazon is expanding its use of automation, with its latest robotics inventions streamlining stowing, picking, packing, and shipping processes.
These innovative strategies have been particularly impactful in Amazon's North American segment, the company's largest. While e-commerce sales increased by 10% year over year during the first nine months of 2024, operating income grew an impressive 87%.
I predict that Amazon will continue to implement these revolutionary cost-cutting measures, thereby amplifying its bottom line and improving profitability.
- To further strengthen its position in the cloud market, Amazon may consider investing more in its finance sector to offer comprehensive cloud solutions with competitive pricing, attracting more businesses and boosting revenue.
- With the accelerated growth in AI technology, Amazon could explore opportunities in fintech, integrating AI capabilities to provide personalized financial services, potentially surpassing its competitors in both the cloud and finance sectors, thereby maximizing its returns on investing in AI.