Shares of Amazon.com Inc. (NASDAQ:AMZN) surged 2.3% to new all-time highs on Wednesday, lifting its impressive year-to-date gains to 44%.
Robust early holiday sales data and optimism surrounding growth signals from AWS’s annual conference in Las Vegas fueled bullish investor sentiment.
The e-commerce giant has now rallied by 160% since the start of 2023, and is on track for its strongest two-year performance since the 2009-2010 period.
Record Cyber Sales Fuel Amazon’s Stock Momentum
Amazon revealed that the 12-day shopping period ending Cyber Monday delivered “record sales and items sold,” with over 60% of transactions coming from third-party (3P) sellers, according to Bank of America analyst Justin Post.
To put that into perspective, Amazon saw 1 billion items sold with a 50% 3P share 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.
Discounting trends mirrored last year's levels, but Amazon claimed that customers saved “billions” this holiday season.
Notably, deals have been extended through Christmas Eve, signaling robust consumer engagement with ongoing promotions.
Data from Profitero showed Amazon's prices were, on average, 14% lower than competitors and 5% lower than Walmart Inc. (NYSE:WMT) — a pricing edge likely to have attracted bargain hunters and boosted market share.
“Discounting is always a risk to 4Q margins, but we think higher 3P mix, delivery speed efficiencies, cost savings from package consolidation, and headcount efficiencies should support margins,” Bank of America wrote in a report.
AWS Re:Invent 2024: AI Steals the Spotlight
Amazon's cloud division, AWS, took center stage this week during its 13th annual re:Invent conference in Las Vegas, attended by a staggering 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 foundational models (FMs) under the Nova suite, including Canvass for image generation and Reel for video generation.
Amazon is also preparing to release a speech-to-speech model in the first quarter of 2025 and an innovative multimodal GenAI model in the second quarter, which will enable any-to-any input/output functionalities.
“We thought tone was upbeat, with broader & deeper product announcements vs. prior years and, while AWS still emphasizes customer choice, we noted a bigger focus on proprietary chips & foundational models,” Post wrote.
According to Amazon, Nova is 75% more cost-effective than competing foundational models and has already been integrated into its Bedrock platform. The company claimed Nova's performance rivals or surpasses competitors in most benchmarks.
JPMorgan analyst Doug Anmuth sees Amazon making significant strides in the GenAI race, narrowing the gap with rivals.
“We come away more confident that AMZN is improving its GenAI positioning and tightening the GenAI gap through silicon development (Trainium2), Bedrock (model distillation), partnerships (Anthropic), breadth of LLMs, and significant customer data already shifted into the AWS cloud," Anmuth said.
According to Anmuth, AWS's AI efforts are beginning to bear fruit, particularly in engineering and coding productivity tools. He anticipates that AI-driven applications and AI agents will become larger growth contributors starting in 2025 and 2026.
AWS contributes roughly 70% of Amazon's operating profits. Any uptick in AI adoption could drive a meaningful acceleration in AWS growth by the end of 2024 and beyond.
ETFs Rally As Amazon Drives Retail Sector Gains
Amazon's strong performance has rippled across retail-focused exchange-traded funds (ETFs), many of which hold Amazon as a top position.
On Wednesday, the Vanguard Consumer Discretionary ETF (NYSE:VCN), the Consumer Discretionary Select Sector SPDR Fund (NYSE:XLY) and the ProShares Online Retail ETF (NYSE:ONLN) jointly established fresh record highs by gaining 0.7%, 0.5% and 0.3%, respectively.
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