Amazon is the latest addition to the trillion-dollar market cap club in an AI-fueled rally

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Amazon’s share price rose 3.9 percent to $193.6 (€180.2), hitting a new high on Wednesday. The price increase pushed the market capitalization up to $2.01 trillion (€1.95 trillion), making the US e-commerce giant the fifth-largest company in the trillion-dollar club, behind Microsoft, Apple, Nvidia and Alphabet. Meta Platforms is in sixth place with a market capitalization of $1.3 trillion (€1.2 trillion).

AI hype further fueled Wall Street’s rally in June, with investors allocating their funds to the leading tech giants. These companies were vying for market share as AI advanced. In early June, Nvidia’s market cap crossed the $3 trillion mark, briefly making it the world’s most valuable company due to its soaring AI chip sales. Apple shares rose sharply after the iPhone maker announced its adoption of AI and partnership with OpenAI.

Strong competition in cloud services

The cloud space is particularly in focus for investors in software-centric companies such as Amazon’s AWS, Microsoft’s Azure and Alphabet’s Google Cloud. Investors are bullish on Amazon’s fast-growing cloud business AWS, which is powered by artificial intelligence. According to market research firm Synergy, the global market for cloud services reached a record $76 billion in the first quarter. The combined market share of AWS, Microsoft and Google Cloud was 67%, with Amazon’s AWS holding the undisputed crown. Statista shows that AWS controlled 31% of the total market, followed by Microsoft Azure with 25% and Google Cloud with 10%.

Since 2023, Microsoft has led the AI ​​race with the launch of ChatGPT, forcing other technology companies to accelerate their AI development and integrate it into their cloud businesses. “Companies use cloud services from these providers for machine learning, data analytics, cloud-native development, application migration and other services,” said research firm Statista.

Amazon’s AWS growth accelerated in the first quarter

Amazon shares have gained 28% this year and 50% compared to the same period last year. In the first quarter, AWS growth accelerated, with the segment’s revenue reaching $25 billion, 17% more than the same quarter in 2023. The performance significantly exceeded the estimated $24.5 billion with growth of 12%.

AWS is considered the company’s core business, is its most profitable division, and contributes 62% of total operating profit. In the first quarter, the division’s operating profit was $9.4 billion, almost double the same quarter last year. In addition, the cloud business generated 17% of total revenue with an operating margin of 38%, representing a notable growth acceleration of 14% and 30%, respectively, from the last quarter of 2023.

A combination of factors have contributed to AWS’s growth, including the adoption of AI, increased corporate spending on cloud computing, and cost-cutting measures. Amazon is bullish on the potential of its generative AI-powered assistant Amazon Q, which is designed to help its customers with software development and internal data analysis. In addition, the expansion of its “strategic collaboration” with Nvidia represents another significant advance in the AI ​​space.

In the company’s annual letter to shareholders in April, CEO Andy Jassy said, “We are optimistic that much of this world-changing AI will be built on AWS.”