Amazon (NASDAQ:AMZN) stock is undoubtedly one of the top tech stocks to buy for 2024. The company is laying the groundwork for accelerated growth in 2024, as cost-cutting measures materialize.
Positive catalysts in the last 12 months suggest Amazon will reach new highs. Most notably, the advent of generative AI to build and scale generative AI models through Amazon Bedrock. They launched a custom AI chip for deep learning inference. Amazon will continue to build on its momentum gained in 2023.
Free Cash Flow and AMZN Stock
Amazon is truly one of the most remarkable businesses of the modern age. Transcending from its humble beginnings as an online bookstore, the company has turned into a diversified global behemoth.
Beyond e-commerce and fast same-day deliveries, Amazon’s cloud computing arm, Amazon Web Services is the leading cloud infrastructure provider holding approximately 31% market share. Ultimately, this has been their bread and butter accounting for about 16% of their total revenue in 2023.
However, what should be the focus is Amazon’s ability to generate robust FCF from operations. In FY23, Amazon generated a record FCF of $36.8 billion in 2023, compared to an outflow of $11.6 billion in 2022. Cost-cutting measures were a primary driver, as well as key investments into generative AI.
This truly may be the turning point for the company, as they drive diversified growth across all segments of their business. The true impact that AI will have on Amazon’s cloud business will be remarkable. With Andy Jassy’s focus on controlling costs, AWS could be the catalyst that takes Amazon’s FCF to new heights over the next decade.
Generative AI Tailwinds to Drive Growth in 2024
Generative AI continues to be one of the most popular topics in the technology sector. Amazon is pushing the boundaries through Amazon Bedrock, Amazon Q, and CodeWhisperer.
Amazon Bedrock is the most comprehensive generative AI platform, allowing AWS customers to build and scale generative AI applications and foundational models. The platform includes strong security and privacy features and currently has over 10,000 customers worldwide.
However, what may be one of Amazon’s biggest selling points is AWS Tranium, a high performance machine learning accelerator. To make things simple, it is a massive AI model with over 100B+ parameters purpose built for a broad set of applications. This can include code generation, image and video generation, text summarization and even chatbot creation.
Amazon’s EC2 deep learning inference chip is custom-built for such applications. The EC2 is the second generation of their interference chip, and should deliver up to 4X higher throughput, which is necessary for accelerating high-frequency ML models.
AMZN Stock Analysis: Buy Today Not Tomorrow
There are many reasons to buy AMZN stock and artificial intelligence is not the only one. What investors should really focus on is the leadership led by CEO Andy Jassy.
The 2022 fiscal year was painful for a majority of large cap technology companies. Especially for Amazon as the company’s operating income, FCF, and EPS fell off a cliff. However, cost-cutting measures in 2023 proved to be material and key investments in generative AI are paving the way for accelerated growth.
Amazon is not only seeing continued momentum in their cloud business, their fulfillment network through Amazon Prime saw record fast deliveries in 2023.
This includes shipping more than 7 billion units for same day or next day delivery. The company is guiding between 8-13% revenue growth in Q1FY24, with operating income in the $8.0 – $12.0 billion range. Now is a great time to snap up shares before Amazon surges to new all time highs in 2024.
On the date of publication, Terel Miles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
