1 Unstoppable Artificial Intelligence (AI) Stock You'll Want to Own Next Year

Group 1: Advertising Business - Amazon's advertising business is accelerating, climbing 24% in the most recent quarter, reaching a $70 billion run rate, with Prime Video being a key catalyst for growth as 80% of subscribers are on the ad-supported tier [1] - The advertising business has expanded from retail media ads to video ads served through Prime Video and other streaming partners [3] Group 2: E-commerce and Marketplace - The online retail business continues to produce high-single-digit revenue growth despite generating over $250 billion in annual sales, with third-party seller services showing accelerating growth, up 11% in the most recent quarter [2] - The entire ecosystem relies on Amazon's Prime subscription service, which has pushed subscription revenue 10% higher [2] Group 3: Cloud Computing - Amazon's cloud computing business, AWS, remains the most important segment, accounting for most of the operating income and achieving 20% year-over-year growth last quarter, driven by strong triple-digit revenue from AI services [7] - Management expects sales in the cloud computing segment to continue at the current pace, supported by a growing backlog that reached $200 billion by the end of the third quarter [8] Group 4: Capital Expenditures and Cash Flow - Amazon is investing heavily in cloud computing and e-commerce, spending $90 billion on capital expenditures in the first three months of the year, with full-year cash capex expected to be around $125 billion [9] - High capital expenditures have impacted Amazon's free cash flow, which fell to $14.8 billion over the trailing-12-month period, down from $47.7 billion in the previous period [10] Group 5: Future Outlook - Amazon has historically emerged stronger from investment cycles, and with a growing backlog of cloud computing contracts, investors are expected to remain confident in future cash flow recovery [11] - Amazon's current market cap of $2.5 trillion suggests that investors are expecting it to return to peak free cash flow levels, which is likely to be exceeded over time, potentially pushing stock prices significantly higher [12]