Artificial intelligence (AI) is causing a stir in the stock market these days with the Nasdaq Composite jumping over 40% last year. The success of tech giants like Microsoft and Nvidia has played a significant role in the S&P 500 reaching new heights.

While Microsoft and Nvidia hog the limelight, e-commerce and cloud computing expert Amazon remains somewhat under the radar. Despite AI investments, concerns over slowing cloud growth and economic challenges have led some investors to question Amazon’s future.

Forecasting the Nasdaq’s Trajectory

Since its inception over 50 years ago, the Nasdaq Composite has posted negative annual returns only 14 times. Notably, the index experienced significant drops of 30% or more in 2002, 2008, and 2022. However, following downturns in 2002 and 2008, the Nasdaq rebounded vigorously in the ensuing years.

Although past performance doesn’t dictate future results, historical data suggests market resilience. With a robust 2023 performance and growing interest in AI, the Nasdaq’s upward momentum could continue into 2024.

Image source: Getty Images.

Amazon’s AI Initiatives

Amazon recently unveiled a significant investment in Anthropic, a key player in AI. This move, primarily aimed at reinforcing Amazon’s cloud services, comes amid a period of tighter financial controls impacting tech companies.

While Amazon’s cloud business faced a slowdown, the partnership with Anthropic showcases Amazon’s strategic approach. By utilizing Amazon’s resources such as AWS and semiconductor chips, Anthropic could drive demand for AI applications in the cloud, potentially benefiting Amazon’s cloud services.

Amazon stands to leverage Anthropic’s technology to boost AWS demand, akin to Microsoft’s integration of ChatGPT. This strategic move could reignite growth in Amazon’s cloud segment.

Amazon’s Appealing Valuation

AMZN PS Ratio data by YCharts

Amazon’s price-to-sales (P/S) ratio indicates it is undervalued compared to other tech giants like Nvidia and Microsoft. The market may be discounting Amazon’s potential AI contributions, offering an attractive entry point for investors.

While Nvidia and Microsoft trade at premiums due to proven AI impacts, Amazon’s undervaluation presents an opportunity for investors eyeing long-term growth potential.

Assessing Amazon’s Position in AI Technology

Amazon, often overshadowed in big tech circles, has been criticized by investors for its perceived lag in artificial intelligence capabilities compared to its peers. Some feel the company’s growth trajectory may not justify a premium valuation. However, I see an opportunity amidst this skepticism.

Potential Disruption and Long-Term Growth

AI’s potential to disrupt Amazon’s e-commerce and cloud businesses cannot be understated. The company, in my view, is strategically positioning itself for sustained growth over the long term. While others may doubt Amazon’s prowess in the AI landscape, I believe this skepticism underestimates the company’s capabilities and potential.

An Attractive Valuation for Investors

Despite the concerns raised, I perceive Amazon’s stock as currently selling at a bargain. Now might be an opportune moment for investors to consider acquiring shares at a valuation that holds promise for long-term growth.

Sound Advice from Stock Analysts

The Motley Fool’s Stock Advisor team recently touted 10 promising stocks for investors to consider, with Amazon notably absent from the list. While experts differ in opinions, it’s essential for investors to conduct thorough research and weigh various perspectives before making investment decisions.