Amazon (NASDAQ:AMZN) is now officially a self-driving company. The e-commerce and cloud giant acquired self-driving startup Zoox for a reported $1.2 billion in late June in a deal that immediately makes Amazon a force to be reckoned with in the self-driving world – and gives investors yet another reason to buy AMZN stock.
Long story short, Waymo is widely considered the head-and-shoulders leader in the self-driving market. It got to that point because it is owned by Alphabet (NASDAQ:GOOG), and therefore, has been supported by the $120 billion of cash sitting on Alphabet’s balance sheet.
Now, Zoox has Amazon’s backing, which includes about $40 billion in cash and a long history of relentless ambition. The combination of Zoox’s tech and Amazon’s resources will propel Amazon into a leadership position in the self-driving market over the next several years.
The long-term implications for Amazon – and AMZN stock – of this company turning into a self-driving leader are huge.
Big enough that you’re going to want to buy and hold AMZN stock for the next decade.
Following in Waymo’s Self-Driving Footsteps
The in-depth discussion of why Waymo has turned into the self-driving leader is complex. But, in essence, it really all boils down to one thing: Waymo just had far more resources than everybody else in the space.
Supported by the world’s largest digital advertising company and third largest cloud company, Waymo was able to hire the best engineers in this space at an early-stage. Those best engineers put their minds together and, early on, created market-leading self-driving tech. Waymo has built on that early lead ever since by tapping into Alphabet’s deep pockets to keep attracting the best talent.
Lather. Rinse. Repeat. And that’s how Waymo emerged as the self-driving leader.
Now, Zoox is positioned to follow in the same footsteps.
The Amazon Factor
Amazon has about $40 billion in near-cash on its balance sheet. The company’s stock has also been one of the best performers on Wall Street, and stock options will naturally act as compelling compensation. Thus, Amazon has ample resources to attract top-notch talent to Zoox over the next few years.
That top-notch talent will build on what was already a solid self-driving foundation created by the original Zoox team. My understanding of the market – corroborated by my sources inside the market – is that Zoox was top 10, and arguably top 5, self-driving company that simply bit off more than they could chew by trying to build a new vehicle from the ground-up while also trying to solve the autonomy problem, all on limited resources.
The tech, though, is good. And Amazon will focus its huge resources into improving that tech.
Net net, in a few years, it’s quite likely that Amazon emerges as a leader in this market, and ultimately challenges Waymo/Alphabet for self-driving supremacy.
A Huge Opportunity in Logistics
The potential upside in AMZN stock as a result of Amazon emerging a self-driving leader is huge.
Self-driving is a big and complex space. The solutions, consequently, are not ubiquitous. Waymo, for example, is aggressively leaning into the ride-sharing market. As such, the company’s self-driving tech is perfect for ride-hailing situations, like self-driving Uber (NYSE:UBER) cars. It isn’t, however, as well suited for logistics, like self-driving delivery vans.
It just so happens that Amazon is the best at logistics in the world. And now they have a self-driving company in their back-pocket.
It doesn’t take a rocket scientist to connect the dots. Amazon has a huge opportunity to leverage its resources and Zoox’s tech to turn into the self-driving leader in the logistics vertical.
Think self-driving vans and trucks. Amazon will emerge as the leader in developing software to power those vehicles. Of course, this will lead to huge reductions in shipping costs and provide a significant boost to margins.
But Amazon won’t stop there. Much like Amazon first developed cloud computing in-house and then sold those services to other businesses via Amazon Web Services, the company will likely first develop self-driving tech in-house and then sell those services to other businesses via something like Amazon Ride Services.
In this sense, Amazon could create an entire new business unit which provides self-driving tech to power the multi-trillion dollar global logistics market.
That’s a huge deal. And the potential upside therein means AMZN stock has a very bright future.
Bottom Line on AMZN Stock
AMZN stock has been, still is, and will remain a long-term winner. The company’s acquisition of Zoox simply underscores that reality, and expands this company from being a dominant play on e-commerce, cloud and digital advertising, to being a dominant play on all that, plus self-driving.
When you sit back and think about it, it’s actually pretty wild. Amazon has exposure to every important growth industry out there.
To that end, the strategy with AMZN stock is very simple. Buy big on dips. Hold for the long haul.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been recognized as one of the best stock pickers in the world by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he was long AMZN.