This Stock Could Benefit From a Major Industry Shift Over the Next Decade

Amazon (NASDAQ: AMZN) currently has a market capitalization of approximately $2.5 trillion and ranks as the world's fifth-largest company. The tech giant leads the market in categories including e-commerce and cloud infrastructure services. It also operates a fast-growing digital advertising business.

Despite the company's many strengths, Amazon has actually significantly underperformed the broader market over the last half-decade. The company's share price has risen roughly 44% over the last five years, but the S&P 500 and the Nasdaq Composite have risen 79% and 73%, respectively.

While Amazon stock has been a market laggard over the last five years, there's at least one big reason to think things will be different over the next five.

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Amazon is likely in the early stages of tapping into an incredible profit driver

Amazon Web Services (AWS) continues to be Amazon's biggest profit generator. The company's market-leading cloud-infrastructure service boasts impressive margins and has kept growing at an encouraging pace. AWS revenue increased 20% year over year in last year's third quarter, and it accounted for $11.4 billion of the company's $21.7 billion in non-GAAP (generally accepted accounting principles) adjusted operating income (almost 53%). Meanwhile, the AWS segment accounted for just $33 billion of the company's $180.2 billion in Q3 revenue (about 18%).

Amazon's e-commerce business continues to generate the large majority of overall sales, but the high costs associated with the online retail business mean that profit margins remain far below what the company's cloud and advertising businesses are delivering. The online retail business will remain relatively capital-intensive compared to those divisions, but there's also a good chance that it will see powerful margin gains over the next five years and beyond.

As advances in artificial intelligence (AI) continue to strengthen robotics and automation technologies, Amazon's e-commerce business could see dramatic margin improvements. The company has made big investments in warehouse automation and autonomous delivery technologies, and these bets appear to be in the very early stages of paying off.

Amazon stands as the world's second-largest company by revenue, trailing behind only Walmart in the category. Based on recent sales trends, Amazon also looks poised to become the biggest company by revenue within the next couple of years.

As AI, robotics, and automation trends continue to evolve, there's a good chance that margins for Amazon's e-commerce business will march well above current levels. Improved profitability for its biggest revenue stream could help Amazon stock deliver market-crushing performance over the next five years and beyond.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool has a disclosure policy.