3 Reasons to Buy Amazon Stock Like There's No Tomorrow

Amazon (AMZN 0.08%) stock is up 24% this year, just edging out the S&P 500. It may not provide the same earth-shattering gains it did for early investors, but it's likely to be a market-beating stock for the foreseeable future. At this later investment stage, that comes with added security. Here are three reasons to believe it's still a no-brainer buy.

1. E-commerce is still growing

Most investors know Amazon as the largest e-commerce company in the world, and that's still its core business and a massive growth driver. Amazon accounts for more than one in three e-commerce sales dollars, a lead so vast that it would be impossible for any competitor to challenge it in the near future.

It lost some ground during the pandemic's height, when there was an unexpected surge of new businesses going online. But it's expected to grab more market share going forward, racing past 40% of all e-commerce sales this year and increasing its share next year, according to eMarketer.

E-commerce itself is expected to grow as a percentage of retail sales, from 20.3% this year to 23% in 2027. That's an organic growth driver for Amazon's business. But organic or not, Amazon is setting itself up to win, keep challenges at bay, and drive higher revenue and margins.

The stores segment increased 9% year over year in the U.S. and 10% internationally. Considering the huge base on which the percentages are increasing, those are impressive metrics equal to billions of dollars. CEO Andy Jassy said shoppers are still switching down to lower-priced brands and products due to inflation, so those numbers could accelerate as inflation moderates.

Management sees plenty of opportunities to lower costs through robotics, great regionalization, and building out its same-day shipping facilities.

2. It's a huge contender in AI

E-commerce may still be Amazon's largest business, accounting for about 62% of sales in the second quarter, but Amazon Web Services is by far the more profitable segment, accounting for 63% of operating income. Don't be fooled by its accounting for less of Amazon's total sales -- it's still the largest cloud company in the world, accounting for 31% of the entire market and edging out top-tier players like Microsoft and Alphabet.

And Amazon is investing hundreds of millions of dollars in carving out its niche in generative artificial intelligence (AI). Like everything else Amazon does, it's doing generative AI in a big way. It wants to be everything to everyone, and that means an unparalleled lineup of services to meet every kind of need, from the smaller business that needs turnkey solutions to enterprise customers that need the most precise customization. Since it's larger than anyone else, and its AI business has already reached a billion-dollar run rate, it can afford to invest and to offer its services at more competitive rates. So while it partners with leader Nvidia for the best chips, it's also developing its own chips to compete on price.

Management still sees this as only the early innings in this business, and Amazon is poised to benefit from a continuing shift to the cloud and AI.

3. Advertising (and everything else) is just getting started

Advertising has become Amazon's fastest-growing segment, up 20% year over year in the second quarter (ended June 30). Amazon has the obvious reach advertisers are looking for, especially third-party sellers who are looking to bring eyes to their product pages. It also uses its AI capabilities to present pinpoint accuracy for advertisers to reach target customers.

It's just getting started in video advertising after creating an ad-supported tier for Prime streaming, where it sees long-term opportunities. Since it's Amazon, it's also looking to offer something better for the customer by showing the fewest ads of any basic TV or ad-supported streaming service.

As always, Amazon is dipping its toes into new businesses that could explode into its next big growth driver, like healthcare and autonomous vehicles.

As large as Amazon is, expect a lot more from this perennial winner, and don't miss the chance to buy as early as you can.