The best growth stocks you can buy right now with $5,000

This year the market was hot, including: S&P500 the index recently hit new highs. This increase was driven by growth stocks as the economy remains solid and the potential of artificial intelligence (AI) is still in its infancy.

The stock is performing well, but there is one growth stock that still looks like a solid buy right now Amazon (NASDAQ: AMZN). If you have $5,000 to invest right now, Amazon could be a fantastic buy. Let’s take a look at what makes stocks an attractive investment today.

E-commerce and cloud giant

When we look at the highest growth stocks in the S&P, the common thread among most of them is that they have become dominant players in some area. Examples include: Apple on smartphones, Alphabet look up Nvidia with graphics processors (GPU).

However, Amazon became the dominant leader two areas of specialization: e-commerce and cloud computing.

In the e-commerce space, Amazon has managed to gain a dominant market share of almost 38%, according to data analytics website Statista. This is much more than the next biggest competitor Walmart with just over 6% share.

Amazon’s dominance can be attributed to its extensive warehouse and logistics network, which can quickly and cheaply deliver both its own products and third-party offerings to customers on its platform. The amount of goods on the platform is enormous, offering consumers an unprecedented number of options. Not to be missed are the reviews on the company’s website and Amazon’s returns policy, which give consumers confidence in their purchases.

Overall, this created a huge moat for the company. At the same time, e-commerce continues to grow rapidly around the world, with Boston Consulting Group forecasting a compound annual growth rate of 9% through 2027.

Amazon should remain the big winner as e-commerce continues to grow and take market share from traditional retailers.

Meanwhile, Amazon is also the No. 1 player in cloud computing thanks to its Amazon Web Services (AWS) platform, which has a market share of around 32%. Global cloud infrastructure services are gaining popularity as companies continue to shift from on-premises to the cloud with the rise of artificial intelligence.

As a result, AWS saw its revenue grow 17% to $25 billion in the first quarter of this year. While this was strong, it came after the rise of Microsoft Azure and Google Cloud. Main rivals achieved growth of 31% and 28% respectively.

The possibilities of artificial intelligence

Over the years, Amazon has shown that it is determined to win and that it is willing to spend money to make it happen. So while the company may currently be lagging behind in the AI ​​race, I don’t expect this to continue.

The story continues

The company is already starting to increase capital expenditures to build new data centers to meet the growing demand for generative artificial intelligence. During its last earnings call, the company said that while it would have to spend money upfront, it would lead to better operating margins and free cash flow in the future.

Amazon has also started selling large language models (LLM) to customers to help them with their artificial intelligence efforts. With Bedrock, the company provides customers with a range of foundational models of both itself and AI startups, and its SageMaker offering helps customers build their own AI models by performing tasks such as preparing data for AI and training models faster. .

The company has also developed its own AI chips in Trainium and Inferentia, although taking market share away from Nvidia won’t be easy given the dominance of its Cuda software platform. Amazon is probably at the lower end of the market at this point, but given the company’s deep pockets and strategy, it’s best not to underestimate it in this area.

Another option is to use artificial intelligence in an e-commerce platform. The company has already introduced some AI-related initiatives, such as making it easier for third parties to create listings with a new AI-powered listing tool where all a customer needs is the URL of an existing website. Artificial intelligence can be applied to many areas of the business, from better product recommendations, to better product search, to improving logistics and inventory management.

Cheap supplies

Given Amazon’s willingness to spend money to build out its logistics network and data centers, my preferred method of valuing the company is to use the enterprise value (EV) to EBITDA multiple. This takes into account the company’s net debt, but ignores non-cash items such as depreciation and amortization. This ratio reflects a company’s ability to generate cash and operating efficiency, while taking into account its debt and cash balances.

From this perspective, the stock is trading at an attractive 13.5x forward multiple. This is significantly lower than the 24x multiple it has traded at in the recent past.

While Amazon is not an AI winner, the company is investing heavily in this area. Meanwhile, history has shown that the company is willing to spend a lot to gain a lot in the long run.

With growth stocks trading at a historic discount and big AI opportunities on the horizon, now is a great time to invest $5,000 or whatever amount works best for you.

Should you invest $1,000 in Amazon now?

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Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Geoffrey Seiler holds positions at Alphabet. The Motley Fool takes positions on and recommends Alphabet, Amazon, Apple, Nvidia and Walmart. The Motley Fool has a disclosure policy.

The Best Growth Stocks You Can Buy Right Now with $5,000 was originally published by The Motley Fool