But the stock's underwhelming returns this year could indicate that it is losing its appeal with growth investors.
One of the questions I always ask myself when considering a stock to buy is whether I think it has the potential to double in value within the next five years. It's a good gauge to determine whether the stock has the strong mix of value and growth potential to be a solid investment.
The point is not about whether you can quickly double your money from an investment, but whether it has enough upside to be a good growth stock.
Amazon (NASDAQ: AMZN) is an intriguing option because it isn't a cheap stock. In fact, it's one of the most valuable companies in the world, with a market cap of around $2.5 trillion. For it to double in value, you would need to believe it can get to $5 trillion. The business has been expanding and continues to grow, but does it truly have the potential to double your money within the next five years?
Let's lay out both the bullish and bearish cases.
Amazon has no shortage of catalysts that could help its top and bottom lines rise in the future.
A big one is undoubtedly Amazon Web Services (AWS). As companies spend more money to invest into artificial intelligence (AI) and put more data onto the cloud, AWS is likely going to benefit from an increase in demand.
And that's great news for investors because AWS accounts for the bulk of the company's operating income. During the first six months of the year, Amazon's operating income has totaled $37.6 billion, and $21.7 billion of that has come from AWS.
There are many other opportunities related to AI for Amazon to pursue as well. For example, it has launched an Alexa+ subscription service, which will give users access to an AI-enhanced personal assistant. For Prime members, there's no added charge for now, but those who aren't will pay $19.99 per month for Alexa's cutting-edge capabilities.
Amazon has also been investing billions into Anthropic, the company that developed the AI chatbot Claude. And it has launched an AI-powered assistant, Rufus, on its online marketplace. By leveraging generative AI more deeply into its operations, that could help the company not only cut costs but also boost revenue by unlocking new growth opportunities and selling more products.