Amazon (NASDAQ: AMZN) is the newest member of the $2 trillion club, and there's little reason to expect that the company's market cap won't go higher in the future. On top of being a mammoth e-commerce stock, the company also gives investors a way to invest in artificial intelligence (AI) and cloud computing.
Now valued at more than $2 trillion, the next question is how quickly it can reach a $3 trillion market cap, which would put it alongside the largest companies in the world. Is it possible for Amazon's stock to hit that level before the end of the year?
Could Amazon be due for a big rally in the second half of 2024?
For Amazon to reach a $3 trillion market cap, it would need to soar by another 50%. That's no small feat, especially with the growth stock already up more than 30% to start the year. But there are potential catalysts that make that a possibility.
The company has a lot of opportunities with respect to AI, and if it can attract some of the hype that has allowed Nvidia to more than double in value this year, it's not all that improbable that Amazon could skyrocket in the latter half of the year.
The tech titan has invested $4 billion into AI company Anthropic, indicating a lot of interest in chatbots. It has also been rolling out AI features to its Alexa assistant, with an opportunity to monetize them through a premium version.
Then there's also the Amazon Web Services segment, which could benefit from a boost in AI-related spending from businesses expanding their cloud capabilities. And this is a big part of Amazon's future growth; the company is planning to spend as much as $100 billion on data centers over the course of the next decade. AI infrastructure is going to present a big opportunity in the future, and the quicker it can capitalize on it, the quicker its share price may take off.
Amazon's growth rate needs to improve
There's no doubt Amazon still has a lot of growth potential. AI could enhance all areas of its business, including e-commerce. Between saving money and creating better experiences for its customers, it's easy to see how this could be a potentially good AI stock to own for the long haul.
But for the shares to surge this year, the company will need its growth rate to accelerate sooner rather than later. During the first three months of 2024, Amazon's sales increased by 13% to $143.3 billion. That's a decent gain, but not what you might expect from a high-powered growth stock. And that's not enough to convince investors that it's getting a big boost from AI-related demand.
Investors will get a better look at how the business is doing after its posts its second-quarter results. If Amazon's growth rate starts to show a significant acceleration and it results in upgraded guidance for the rest of the year, that could be the catalyst that the stock needs to lead to some outsize gains in the weeks and months ahead.
The stock will likely hit $3 trillion, but it may not be this year
I'm bullish on Amazon's long-term prospects, but I don't expect it will reach a $3 trillion market cap this year. A lot would need to go right for the stock get that hot so quickly. And with the company already generating more than $140 billion in quarterly revenue, it would need to generate a seismic amount of growth to significantly move the needle. It's not impossible, but it just doesn't look probable right now.
Even if it doesn't reach a $3 trillion market cap this year, however, Amazon could still be a terrific investment to add to your portfolio for the long haul.
Should you invest $1,000 in Amazon right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
