Amazon Well-Posted for ‘Battle of AI Titans’: Analyst

Amazon’s (AMZN) market capitalization surged past $2 trillion last week, while fellow tech giants Apple (AAPL), Nvidia (NVDA) and Microsoft (MSFT) vacillate for the title of most valuable company.

Tom Forte, managing director of Maxim Group and senior analyst for consumer internet, favors Amazon in the next chapter of the AI ​​race and the broader rise of big tech companies.

“I think there’s a chance that their (Amazon) healthcare initiatives will help them get to the $3 trillion mark. More likely it’s going to be… growth in advertising, e-commerce, cloud computing,” Forte tells Market Domination. “I think they’re very early in their efforts. But I think there’s potential, given that it’s a huge total addressable market (TAM) and maybe one that’s potentially ripe for disruption…”

Forte also comments on Apple’s own AI initiatives and whether Amazon investors should treat the regulatory crackdown as “just noise.”

For more expert opinions and the latest market updates, click here to watch the full episode of the Market Domination podcast.

This post was written by Luke Carberry Mogan.

Video Transcription

Well, AI companies that see their market capitalization grow in the first half of the year are successful.

Amazon is the latest company to hit a milestone, reaching a market capitalization of $2 trillion for the first time.

At the same time, Apple, Microsoft, NVIDIA are all vying for the title of most valuable company. We want to learn more about what might be in store for these large-cap stocks. We want to hire a managing director and senior analyst for consumer internet from Maxim Group.

It’s nice talking to you.

So we are ready for the second half of the year.

We certainly witnessed this massive increase once again.

I mean, the story is very similar if we go back to 2023.

It all revolves around a handful of names from the tech world.

Who do you think is in the best position going into the rest of the year, Tom?

Yes, I like Amazon.

So at some point when you think about AI, um, today it’s dominated by tokens, but at some point tokens or paintings and pickaxes and shovels are going to have to lead to real gold.

I think Amazon is well-positioned to explore AI capabilities, not just at the cloud computing level, in the context of AWS, but also at the fulfillment center level, to the extent that it can increase automation and reduce the cost of serving.

So I think Amazon is well prepared to take on the AI ​​Titans, Tom.

When you think of Amazon, you think of these key factors, right?

You know, it’s e-commerce, it’s cloud, it’s advertising, and also the things that they’re doing in healthcare.

The story continues

Tom, I’m curious about your opinion.

How excited do you think investors should be about this opportunity?

So when I think about Amazon having a market cap of two trillion, I think there’s a chance that their healthcare initiatives will help them get to the three trillion mark.

It’s more likely what you’ve seen, which is e-commerce advertising, the rise of cloud computing. I think they’re still in the very early stages of their efforts.

But I think there’s potential, given that it’s a huge, fully regulated market and maybe one that’s potentially ripe for disruption, but I think I’m taking a wait-and-see approach to how their healthcare efforts ultimately impact their revenues and profits and market cap.

Tom Amazon has managed to reach this milestone at a time when the company is under enormous scrutiny from an antitrust perspective. I’m curious, not just about Amazon, but about what we’re seeing with many of the larger technology companies.

Should investors treat any regulatory crackdown or criticism of regulation as insignificant?

I don’t think so. I think investors see it as hype, but I don’t think they should treat it that way.

But if I compare companies that are being sued for antitrust violations, I think Amazon is in a better position than Apple, unless Amazon is broken up into three different companies: a retail company, a retail company, and a cloud computing company, you could argue that the stock of those three companies is worth more than all of them combined.

I don’t think the same principle can be applied to Apple.

This means that if a company charges too much on the App Store and has to lower it, that would have a very negative impact on the stock value in my opinion.

You know, Tom, stick with Apple.

I mean, you know, I’ve just been doing really well here lately, Tom.

Well, you’re still neutral.

What, what do you need to see, Tom, to get you off the sidelines?

What do you need to pay attention to when making a purchase on the Apple website?

So if you look at Apple, they’ve had a really good run.

First.

They announced a $100 billion stock buyback and then announced that Apple Intelligence and all of their AI strategies are stocks that are valued at more than 30 times their projected net earnings multiple.

If they do as well with their iPhone A IL update cycle, we can expect 9-10% earnings per share growth next year.

There is still a fairly high C3 peg ratio.

So I would be more interested in stocks that have a better valuation that I like, either because the earnings growth is better than I expect or the near-term multiple is lower than it is now.

Tom, what do you think the demand will look like?

Of course, we reacted to the news that came out a few weeks ago regarding their AI initiatives.

Is that enough?

To drive demand, do you think the Street needs to be more specific about what that will look like?

That’s why I’ve become more optimistic about Apple recycling.

But the challenge was doing the analysis when we compared it to 5G. I don’t think there’s as much demand for an AI-enabled smartphone as there is for a 5G smartphone.

We also look at the regulatory challenges for Apple in Europe and China.

About 20% of Apple’s sales come from Europe.

China accounts for about 10%.

So at this time it will not be possible to launch Apple Intelligence in these markets in September.

So I think it’s an update cycle, but not as good as the Five G update cycle.

Okay, Tom Forte.

It’s always nice to have you.

Thank you so much for taking the time to join us today.

Thank you.