Actions of Amazon.com Inc. AMZN surged 2.3% to new all-time highs on Wednesday, bringing its impressive year-to-date gains to 44%.
Robust early holiday sales data and optimism surrounding growth signals from AWS’ annual conference in Las Vegas fueled bullish investor sentiment.
The e-commerce giant is now up 160% since the start of 2023 and is on track to deliver its strongest two-year performance since the 2009-2010 period.
Record online sales fuel Amazon’s stock market momentum
Amazon revealed that the 12-day shopping period ending with Cyber Monday generated “record sales and items sold,” with more than 60% of transactions coming from third-party (3P) sellers, according to Amazon. Bank of America analyst. Justin Post.
To put that into perspective, Amazon saw 1 billion items sold with a 3P share of 50% during the same period last year.
Top categories included electronics, where Echo Dots and Fire TV Sticks stole the show, as well as toys and beauty products.
Discount trends reflect last year’s levels, but Amazon claimed its customers saved “billions” this holiday season.
Notably, deals have been extended through Christmas Eve, signaling strong consumer engagement with ongoing promotions.
Profitero data showed that Amazon’s prices were, on average, 14% lower than its competitors and 5% lower than its rivals. Walmart Inc. WMT — a price advantage likely to have attracted bargain hunters and increased market share.
“Discounts are still a risk to Q4 margins, but we believe a higher 3P mix, delivery speed efficiencies, cost savings from package consolidation and better workforce efficiencies should support margins,” Bank of America wrote in a report.
AWS Re:Invent 2024: AI steals the show
Amazon’s cloud division, AWS, took center stage this week at its 13th annual re:Invent conference in Las Vegas, attended by an impressive 60,000 people. The event featured announcements that solidify Amazon’s AI ambitions and aim to narrow its gap with cloud rivals like Microsoft and Google.
Key highlights include the launch of Trainium2, Amazon’s proprietary AI chip, and new fundamental models (FM) under the Nova suite, including Canvass for image generation and Reel for video generation.
Amazon is also preparing to launch a speech-to-speech model in the first quarter of 2025 and an innovative multimodal GenAI model in the second quarter, which will enable anywhere input/output capabilities.
“We thought the tone was optimistic, with broader and deeper product announcements compared to previous years and, while AWS still emphasizes customer choice, we noted a greater focus on proprietary chips and fundamental designs,” Post wrote.
According to Amazon, Nova is 75% more cost-effective than competing fundamental models and has already been integrated into its Bedrock platform. The company claimed that Nova’s performance rivals or surpasses its competitors in most criteria.
Analyst at JPMorgan Doug Anmuth sees Amazon making significant progress in the GenAI race, closing the gap with its rivals.
“We leave more convinced that AMZN is improving its GenAI positioning and closing the GenAI gap thanks to silicon development (Trainium2), Bedrock (model distillation), partnerships (Anthropic), breadth of LLMs and data important customers already transferred to the AWS cloud. ” said Anmuth.
According to Anmuth, AWS’s AI efforts are starting to pay off, particularly in engineering and coding productivity tools. It predicts that AI-based applications and agents will contribute more to the growth from 2025 and 2026.
AWS contributes approximately 70% of Amazon’s operating profits. Any increase in AI adoption could lead to a significant acceleration in AWS growth by the end of 2024 and beyond.
ETFs Rally as Amazon Drives Retail Gains
Amazon’s strong performance has carried over to retail-focused exchange-traded funds (ETFs), many of which have Amazon in first place.
Wednesday, the Vanguard Consumer Discretionary ETF Virtual Cloud NetworkTHE Consumer Discretionary Select Sector SPDR Fund XLY and the ProShares Online Retail ETF ONLN they jointly set new records by gaining 0.7%, 0.5% and 0.3% respectively.
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