Amazon is the third-largest digital ad company in the U.S., and this business is growing quickly.
Meanwhile, it is the leader in AI cloud computing, which could be a $2 trillion opportunity.
Amazon is the hands-down leader in U.S. e-commerce, and its rivals don’t even come close.
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Amazon (NASDAQ: AMZN) has been a tremendous stock for long-term investors, including its 55% gains over the past three years. But that’s only slightly outpaced the S&P 500 over that time, leaving some investors wondering if Amazon stock has permanently lost its luster.
I think that sentiment fails to account for Amazon’s strong position in some very big markets and how hard it will be for competitors to catch up. To that end, here are three reasons why it’s still a smart move to buy Amazon stock right now.
Amazon is an advertising powerhouse as the No. 3 ad platform, after Alphabet and Meta Platforms. While those are certainly big shoes to fill, Amazon has made impressive gains over the past several years. Consider that Amazon had less than 11% of the U.S. digital market in 2021 and will have an estimated 17% by next year. That’s beginning to nip at the heels of Meta’s 21% market share.
Advertising is also Amazon’s fastest-growing business, with ad sales rising 23% in the second quarter to $15.7 billion. Unlike its rivals, Amazon’s ad sales have a built-in advantage for the company, as advertisers spend money to sell goods on Amazon’s platform, allowing the company to benefit from both the ad sales and the online purchases. And with the U.S. digital advertising market expected to grow into an estimated $220 billion market by 2030, there’s still room for Amazon to benefit.
Some people have been disappointed with Amazon’s cloud revenue growth lately, but I think they miss the fact that Amazon has the largest cloud computing market share, with 30% compared to Microsoft‘s 21% and Google’s 12%.
Microsoft is certainly making lots of ground and shouldn’t be ignored. However, the AI cloud computing market will be worth an estimated $2 trillion by 2030, so there’s plenty of room for both companies to benefit.
What’s more, Amazon is still investing in its cloud computing business and will increase its capital expenditure spending to $118 billion this year, mostly to expand its AI infrastructure.
Amazon has about 38% of the U.S. e-commerce market share. It’s such a huge lead that some of the largest retailers barely register. Walmart‘s platform takes just 6% of the market, and Target has spent years improving its online offerings and still has only 2% of the U.S. e-commerce market.
