Prediction: This AI Stock Will Be Worth More Than Nvidia and Palantir Combined by 2030

Key Points

• Nvidia and Palantir are currently worth a collective $4.7 trillion, but Amazon can surpass that figure within five years, which implies 109% upside for shareholders.

• Amazon has a strong presence in e-commerce, digital advertising, and cloud computing, and it’s using artificial intelligence to improve operational efficiency.

• Wall Street expects Amazon's earnings to increase at 18% annually over the next three to five years, which makes the current valuation of 34 times earnings look fair.

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Nvidia and Palantir Technologies are two of the most popular artificial intelligence stocks. Their collective market value is currently $4.7 trillion. I think Amazon (NASDAQ: AMZN) can surpass that figure by 2030. Here's what my prediction means for shareholders:

Amazon is currently worth $2.3 trillion. Its market value must increase 109% to reach $4.8 trillion, and reaching that figure by 2030 implies shareholders would see annual returns of roughly 16% over the next five years. Here's why that seems like a distinct possibility.

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Amazon is a major player in three growing industries

Amazon reported encouraging financial results in the second quarter. Revenue increased 13% to $167 billion, operating margin expanded 150 basis points, and GAAP net income increased 33% to $1.68 per diluted share. Amazon is well positioned to maintain that momentum due to its strong presence in three growing industries.

• Amazon runs the largest e-commerce marketplace in North America and Western Europe in terms of gross merchandise volume. Retail e-commerce sales are projected to increase at nearly 12% annually through 2030, according to Grand View Research.
• Amazon is the third largest ad tech company and the largest retail advertiser in the world as measured by revenue. It is also the fourth-fastest growing ad tech company worldwide. Digital ad spending is forecast to increase at 15% annually through 2030.
• Amazon Web Services (AWS) operates the largest public cloud platform as measured by infrastructure and platform services spending. Cloud computing sales are projected to increase at 20% annually through 2030 driven by demand for data analytics and artificial intelligence (AI) tools.

Importantly, if Amazon merely matches the growth rates in those three markets, total revenue could increase at annualized pace of 13% to 14% through the end of the decade. But earnings could grow even faster. The company is using artificial intelligence to make its business more profitable, particularly across its retail operations.

Amazon is innovating with artificial intelligence and robotics

Amazon has designed over 1,000 generative AI applications to improve efficiency across its retail operations. That includes tools to optimize inventory allocation, demand forecasting, and last-mile delivery. The company recently introduced an AI model to help its robot fleet navigate warehouses more quickly, and another model in development will let warehouse workers engage fulfillment robots in natural language.

Additionally, The Information reports Amazon is developing humanoid robots to assist its drivers with package delivery. Initially, robots could carry packages from delivery vans to doorsteps while human drivers wait in the vehicle. But the entire process could eventually be automated because Amazon is also testing robotaxis with its autonomous driving subsidiary Zoox.

Elsewhere, Amazon developers are using an AI coding assistant (Amazon Q Developer) to automate tedious and repetitive tasks. CEO Andy Jassy told analysts last year, "With Q's code transformation capabilities, Amazon has migrated over 30,000 Java JDK applications in a few months, saving the company $260 million and 4,500 developer years compared to what it would have otherwise cost."

Brian Nowak at Morgan Stanley says Amazon is "one of the companies best positioned to deliver material financial return from physical AI and robotics" over the next three to five years. He estimates costs related to shipping and fulfillment currently consume about 36% of retail sales, so the company should become much more profitable at those workflows are automated.

Why Amazon could be a $4.8 trillion company by 2030

Amazon shares currently trade at 34 times earnings, a reasonable valuation for a company whose earnings are forecast to increase at 18% annually over the next three to five years. If Amazon meets that consensus estimate, its market value can increase 109% to $4.8 trillion by late 2030, while its valuation falls to 31 times earnings.

In the scenario I described, Amazon in five years would be worth more than the combined market values of Nvidia and Palantir today.

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Trevor Jennewine has positions in Amazon, Nvidia, and Palantir Technologies. The Motley Fool has positions in and recommends Amazon, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.