Amazon Stock Just Saw Its Biggest Surge in Months. Here Are 3 Reasons AMZN Is a Great Buy Right Now
Key Points
CEO Andy Jassy's letter sparked a rally in Amazon's shares.
More gains lie ahead for investors who buy Amazon's stock today.
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Skeptics have grown increasingly concerned about a potential bubble in artificial intelligence (AI) stocks. Those fears are overblown, according to Amazon (NASDAQ: AMZN) CEO Andy Jassy.
In a letter to shareholders, Jassy explained why he's excited about the cloud computing titan's AI-driven future. Investors took notice, driving Amazon's shares up nearly 14% this week.
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Yet this AI-fueled rally might just be getting started. Some of the reasons Jassy gave for his optimism also help to explain why Amazon's stock is still an excellent buy today.
Image source: The Motley Fool.
1. "We have never seen a technology more quickly adopted than AI."
Jassy likened AI's future impact to that of electricity, which reorganized "every factory, home, and industry on Earth."
Yet he noted that while electricity took 40 years to have these effects, AI is "moving ten times faster."
"Every customer experience will be reinvented by AI, and there will be a slew of new experiences only possible because of AI," Jassy said.
2. "Amazon is smack in the middle of this land rush, and companies are choosing AWS for AI."
Jassy noted that Amazon Web Services' AI revenue run rate was already more than $15 billion in the first quarter and growing rapidly. He also said that AWS would be expanding even faster if it were not for capacity constraints the company is working to resolve.
Jassy gave several reasons for AWS' AI success. He highlighted Amazon's broad suite of model- and agent-building tools, highly regarded cybersecurity, and low-cost inference offerings. Jassy also explained that AWS enables its customers to connect their AI and non-AI applications in a way that helps to reduce latency and improve performance.
3. "We have customer commitments that make our capex investments predictable."
Many investors were shocked when the e-commerce giant announced planned capital expenditures of roughly $200 billion for 2026. That's a big number, even for the mighty Amazon.
Yet Jassy was clear that he wasn't spending this money "on a hunch." Instead, he noted that Amazon already has commitments from its cloud computing clients for a substantial portion of the capacity AWS will be bringing online.
Additionally, Jassy expects Amazon to generate "attractive" returns on capital and free cash flow from these investments within "a couple of years after being in service."
"We're investing to be the meaningful leader [in AI], and our future business, operating income, and FCF will be much larger because of it," Jassy said.
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Joe Tenebruso has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
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