Artificial intelligence (AI) is dominating the technology sector right now, and one company that stands to benefit greatly is e-commerce and cloud computing leader Amazon (AMZN).
Roughly halfway into 2024, shares of Amazon have soared by 23%, handily topping the 15% year-to-date gain of the S&P 500 and the 19% rise of the Nasdaq Composite. Yet even in the wake of this strong performance, Doug Anmuth of JP Morgan Chase thinks Amazon stock could rocket by another 28% over the next 12 months.
Amazon's Cash-Flow Empire: A Common Ground for Buffett and Wood
Two of the most closely followed institutional investors are Berkshire Hathaway CEO Warren Buffett and Ark Invest CEO Cathie Wood.
Admittedly, Wood and Buffett don't have a lot in common when it comes to their investment styles. Buffett's portfolio is dominated by blue chip businesses with consistent cash flows. By contrast, Wood often takes positions in companies that operate in emerging technologies such as genomics, space exploration, and different aspects of the tech realm.
One stock that they both own, though, is Amazon. While those positions are relatively small compared to their other holdings, it's intriguing that these two have any overlap across their respective portfolios.
One of the reasons both Buffett and Wood own Amazon has to do with its cash flow. Many growth companies (especially in technology) burn cash for long periods in pursuit of accelerated revenue growth. Amazon, however, now generates a staggering level of profit. For the 12-month period that ended March 31, the company increased its operating cash flow by 82% year over year to $99 billion. Moreover, Amazon's free cash flow over that duration was a whopping $50 billion.
While it's the company's robust free cash flow that likely attracts an investor like Buffett, it's how management is investing these excess profits that piques the interest of Wood.
Two of the most closely followed institutional investors are Berkshire Hathaway CEO Warren Buffett and Ark Invest CEO Cathie Wood.
Admittedly, Wood and Buffett don't have a lot in common when it comes to their investment styles. Buffett's portfolio is dominated by blue chip businesses with consistent cash flows. By contrast, Wood often takes positions in companies that operate in emerging technologies such as genomics, space exploration, and different aspects of the tech realm.
One stock that they both own, though, is Amazon. While those positions are relatively small compared to their other holdings, it's intriguing that these two have any overlap across their respective portfolios.
One of the reasons both Buffett and Wood own Amazon has to do with its cash flow. Many growth companies (especially in technology) burn cash for long periods in pursuit of accelerated revenue growth. Amazon, however, now generates a staggering level of profit. For the 12-month period that ended March 31, the company increased its operating cash flow by 82% year over year to $99 billion. Moreover, Amazon's free cash flow over that duration was a whopping $50 billion.
While it's the company's robust free cash flow that likely attracts an investor like Buffett, it's how management is investing these excess profits that piques the interest of Wood.
Strategic AI Investments: Amazon's Play for Future Dominance
Like many of its big tech peers, Amazon has been aggressively pursuing all things AI over the last year or so.
The first major move the company made on that front was a $4 billion investment in Anthropic, a competitor to OpenAI. In addition, Amazon is an investor in machine-learning start-up Hugging Face. Moreover, back in April, the company announced an $11 billion infrastructure project to build out data centers in Indiana.
All of these moves are pieces of a larger puzzle. These assets should play important roles as the company begins rolling out additional AI features across its ecosystem. The Amazon Web Services (AWS) cloud computing platform stands to benefit greatly from these AI investments, as do its legacy e-commerce business and fast-growing advertising operation.
Like many of its big tech peers, Amazon has been aggressively pursuing all things AI over the last year or so.
The first major move the company made on that front was a $4 billion investment in Anthropic, a competitor to OpenAI. In addition, Amazon is an investor in machine-learning start-up Hugging Face. Moreover, back in April, the company announced an $11 billion infrastructure project to build out data centers in Indiana.
All of these moves are pieces of a larger puzzle. These assets should play important roles as the company begins rolling out additional AI features across its ecosystem. The Amazon Web Services (AWS) cloud computing platform stands to benefit greatly from these AI investments, as do its legacy e-commerce business and fast-growing advertising operation.
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