Amazon's market capitalization topped $2 trillion amid optimism about its AI-driven cloud business.
advertisementAmazon's shares rose 3.9 percent to $193.6 (180.2 euros), hitting a record high on Wednesday. The surge gives it a market capitalization of $2.1 trillion (1.95 trillion euros), making the US e-commerce giant the fifth-largest company in the trillion-dollar club, behind Microsoft, Apple, Nvidia and Alphabet. Meta Platforms is in sixth place with a market capitalization of $1.3 trillion (1.2 trillion euros).
The AI craze continued to drive a rise in Wall Street stocks in June, as investors funneled money into big technology companies that have been competing for market share with advances in AI. Nvidia's market capitalization topped $3 trillion in early June, briefly making it the world's most valuable company thanks to surging sales of AI chips. Shares of iPhone maker Apple soared after the company announced it was embracing AI and partnering with OpenAI.
Intense competition in cloud services
The cloud sector is a particular focus for investors in software-centric companies like Amazon's AWS, Microsoft's Azure, and Alphabet's Google Cloud. Investors are optimistic about Amazon's fast-growing cloud business AWS, which leverages AI. The global cloud services market hit a record high of $76 billion in the first quarter, according to market research firm Synergy. Amazon's AWS remains steadily at the top, with a combined market share of 67% for AWS, Microsoft, and Google Cloud. According to Statista, AWS accounts for 31% of the total market, followed by Microsoft Azure at 25% and Google Cloud at 10%.
Microsoft is leading the AI race with the launch of ChatGPT in 2023 and beyond, encouraging other tech companies to accelerate AI development and integrate it into their cloud businesses. “Organizations are using these vendors' cloud services for machine learning, data analytics, cloud-native development, application migration and other services,” research firm Statista said.
Amazon's AWS growth accelerates in Q1
Amazon shares are up 28% this year and 50% compared to the same period last year. AWS growth accelerated in the first quarter, with the division's revenue reaching $25 billion, up 17% from the same quarter in 2023. Results were up 12%, well above estimates of $24.5 billion.
AWS is considered the company's core business and is its most profitable division, accounting for 62% of total operating income. The division's operating income in the first quarter was $9.4 billion, nearly double the same period last year. Moreover, the cloud business generated 17% of total revenue and had an operating margin of 38%, with significant acceleration in growth from the fourth quarter of 2023 to 14% and 30%, respectively.
AWS' growth is driven by a mix of factors, including the adoption of AI, rising enterprise spending on cloud computing, and cost-cutting measures. Amazon is betting that its generative AI assistant, Amazon Q, can help customers with software development and in-house data analysis. Additionally, its expanding “strategic collaboration” with Nvidia represents another big advance in the AI space.
In the company's annual letter to shareholders in April, CEO Andy Jassy said he was “optimistic that much of the world-changing AI will be built on AWS.”
