Why Amazon Stock Skyrocketed 27.3% Last Month and Has Kept Climbing in May
Key Points
Amazon landed a big new chip deal with another tech giant last month.
Amazon also reported better-than-expected quarterly results.
The company's share price has continued to rise this month amid bullish momentum for the tech sector.
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Amazon (NASDAQ: AMZN) stock had an explosive, bullish month in April. The company's share price surged 27.3% higher in the month of trading that played host to a 10.4% rally for the S&P 500 index and a 15.3% surge for the Nasdaq Composite index.
Amazon stock got a boost from the bullish backdrop for the broader market, but its valuation also saw huge gains in conjunction with company-specific news. In addition to big news about the company's semiconductor initiatives, the tech giant also served up quarterly results that beat Wall Street's targets.
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Amazon stock had a monumental April
Investors came flocking back to tech stocks in April, and Amazon was an outsized participant in the sector rally. A two-week ceasefire in the Iran war was announced on April 7, and the ceasefire agreement was then extended after the two-week deadline passed so that progress on negotiations to end the conflict could be made. In addition to this bullish catalyst, a lower-than-expected core Personal Consumption Expenditures Price Index (PCE) read for March and stronger-than-expected hiring data also helped push the broader market higher.
Amazon investors then got some very promising business-specific news on April 24 with the announcement that Meta Platforms was contracting with the company to secure access to its custom artificial intelligence (AI) chips. Through the partnership, Meta will be integrating "tens of millions of AWS Gravitron cores" into its compute portfolio. The deal is a big win for Amazon and suggests that custom AI chips could be poised to emerge as a substantial driver of long-term growth for the company.
Amazon shareholders got some more good news on April 29 with the publication of results for the first quarter of the company's current fiscal year -- which closed March 31. The business recorded earnings per share of $2.78 and revenue of $181.52 billion, surpassing the average Wall Street analyst estimate's call for per-share earnings of $1.64 and revenue of $177.3 billion.
Amazon Web Services revenue rose 28% year over year to hit $37.59 billion and beat Wall Street's target for sales of $36.64 billion. Revenue of $17.24 billion for the advertising business also topped the average analyst estimate's target for revenue of $16.87 billion. All in all, it was a very strong quarter for the tech giant.
Amazon has kept climbing in May
The rally for tech stocks has continued in May, and Amazon is up roughly 3% in the month as of this writing. The S&P 500 has gained 2.4% in the month, and the Nasdaq Composite is up 4.8%.
While fighting flare-ups in the Strait of Hormuz have caused some concerns about whether the ceasefire in the Iran war will hold, President Donald Trump has said that the ceasefire remains in effect -- and investors have remained broadly optimistic. The latest jobs report from the Bureau of Labor Statistics showing that nonfarm payrolls increased by 115,000 in April, exceeding economists' target for 55,000 job additions, is also adding to bullish sentiment. With the market adopting optimistic positioning regarding macroeconomic and geopolitical dynamics, Amazon stock could see strong support as investors seek out top AI plays.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Meta Platforms. The Motley Fool has a disclosure policy.
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