Why Amazon Stock Rallied on Tuesday
What happened
Shares of Amazon (NASDAQ: AMZN) climbed higher on Tuesday, adding as much as 2.8%. As of 2:51 p.m. ET, the stock was still up 2.6%.
While the broader market updraft no doubt adding fuel to its rise, the catalyst that sent the e-commerce titan higher was an announcement regarding a collaboration with Nvidia (NASDAQ: NVDA).
So what
Amazon Web Services (AWS) and Nvidia announced a multipart collaboration with the goal of building the "world's most scalable, on-demand artificial intelligence (AI) infrastructure." The system is being designed to train increasingly complex large language models, like those responsible for OpenAI's ChatGPT and GPT-4 and Alphabet's Google Bard.
The partnership will employ Nvidia's H100 Tensor Core graphics processing units (GPUs), paired with Amazon Elastic Compute Cloud (EC2) P5, providing "state-of-the-art networking and scalability that will deliver up to 20 exaFLOPS of compute performance for building and training the largest deep-learning models."
The latest advances in AWS's Elastic Fabric Adapter (EFA) technology will allow customers to scale their P5 instances to tap up to 20,000 H100 GPUs, up from 10,000 previously, providing them with "access to supercomputer-class performance for AI."
Now what
The emergence of chatbots as the next face of AI has captured the public imagination, with investors scrambling to identify the biggest investment opportunities. Nvidia CEO Jensen Huang called the evolution of large language models the "iPhone moment of AI," so it's only natural that AWS would be at the forefront, bringing the ability to generate and access this technology in the cloud.
There are other reasons to like Amazon. Even in the midst of the downturn, its dominance of e-commerce is undisputed, while it remains the industry leader in cloud computing, with a formidable No. 3 position in digital advertising.
If you're still not convinced, consider this: Amazon stock is currently selling for less than 2 times sales, putting it squarely in bargain-basement territory. That's a small price to pay for so many growth opportunities.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Alphabet, Amazon.com, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon.com, and Nvidia. The Motley Fool has a disclosure policy.
