Amazon and AWS Lead with Strong Generative AI Growth
Amazon (AMZN) has seen a notable performance in the market, with its shares increasing by 16.1% year-to-date, surpassing the Zacks Internet Commerce industry’s return of 11.1%. This growth is significantly attributed to the success of its cloud computing division, Amazon Web Services (AWS), which is experiencing a strong momentum thanks to its expanding customer base and advancements in generative AI capabilities.
AWS has recently partnered with SAP (SAP) to enhance the implementation of generative AI for various enterprises. SAP plans to incorporate generative AI solutions within its enterprise resource planning (ERP) applications utilizing AWS. This collaboration involves integrating generative AI models from Amazon Bedrock, including the Anthropic Claude 3 model family and Amazon Titan, into SAP’s AI Core. This move makes AWS the first cloud provider certified to support the SAP portfolio, further strengthening AWS’s client base by leveraging AWS Graviton3 chips for SAP HANA Cloud and planning to use AWS Trainium and AWS Inferentia chips for future SAP business AI offerings.
The partnership underscores the growing importance and capability of AWS in the generative AI space, potentially boosting Amazon’s performance in the cloud market. The global generative AI market is expected to reach $191.8 billion by 2032, growing at a CAGR of 34.1% from 2023 to 2032, and AWS’s generative AI efforts are well-positioned to capitalize on this growth.
AWS’s expansion is not only evident from its partnership with SAP but also through its collaborations with companies like NinjaTech AI, CrowdStrike, Brightcove, and BlackBerry, all of which are leveraging AWS’s generative AI and cloud computing solutions for various innovative applications.
Amazon’s overall performance benefits significantly from AWS, which generated revenues of $25.04 billion in the first quarter of 2024, accounting for 18% of Amazon’s total sales and marking a 17% year-over-year growth. The company’s focus on expanding its global presence, alongside growing capabilities in sectors like grocery, pharmacy, healthcare, and autonomous driving, further supports its competitive edge. With a Zacks Rank #3 (Hold), Amazon’s forward-looking growth is also reflected in the positive revision of its 2024 earnings estimates, indicating an 11% year-over-year revenue growth and a 57.9% increase in earnings per share.
Amazon’s strategic emphasis on generative AI places it at a vantage point against cloud competitors such as Microsoft Azure and Google Cloud, ensuring its sustained dominance and innovative edge in the rapidly evolving cloud market.