AI Shares Plummet 10%, Predicted to Surpass Values of Nvidia and Palantir by 2030
Amazon's cloud computing division, Amazon Web Services (AWS), posted a robust performance in the second quarter, with a revenue growth of 17.5% to $30.9 billion. This equates to an annualized rate of $123.6 billion, a testament to AWS's dominance in the cloud computing market.
Despite competition from tech giants like Microsoft, AWS remains the leader in cloud computing, with an operating income of $43 billion over the last 12 months. This figure is expected to rise significantly by 2030, potentially reaching close to $100 billion.
The growth of AWS is attributed to the rising tide of AI spending in the years to come. In fact, the relationship between AWS and Anthropic, the second-largest AI start-up, valued at nearly $200 billion, is a significant factor in this growth. Anthropic's revenue is rapidly increasing, reaching $5 billion in annualized sales in July, up from $4 billion a month earlier. The company has committed billions of dollars to spend on AWS, which will help accelerate revenue growth for the division.
Amazon's lower valuation and multiple growth engines (cloud computing and e-commerce/retail) make it a potential candidate to have a larger market cap by 2030 compared to Nvidia and Palantir.
In the e-commerce sector, Amazon's North American division saw a growth of 11% last quarter, with sales reaching $100 billion. Over the last 12 months, this division generated $404 billion in sales. The international e-commerce sales reached $150 billion in trailing-12-month sales.
Growth in advertising services is driving margin expansion for Amazon's retail divisions. The North American retail division has an operating margin of 7% over the last 12 months, and the international division has a margin of 3.4%.
Amazon is also investing in moonshot projects such as Alexa and Project Kuiper, as well as fast delivery services in rural areas, with expectations of expanding profit margins.
Interestingly, Amazon's Trainium chip is taking on more capacity every quarter, potentially reducing its reliance on advanced computer chip maker Nvidia. This strategic move could further boost Amazon's financial performance.
However, Amazon's stock dropped 10% from highs after reporting slower growth in its cloud computing division compared to the competition. Despite this temporary setback, the company's strong financial performance and strategic investments suggest a promising future.
In summary, Amazon's cloud computing division, AWS, continues to dominate the market, with significant growth expected in the coming years. The company's e-commerce sector also remains strong, with growth in advertising services driving margin expansion. Strategic investments in moonshot projects and self-sufficient technology, such as the Trainium chip, position Amazon well for future success.
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