Amazon (NASDAQ:AMZN) stock also got in on the post-election rally, soaring 3.8% in a day following growing hype over a second Donald Trump presidency. The single-day Trump jump actually helped AMZN break out to a new all-time high of over $207 per share.
Indeed, this breakout is a long time coming. And while it’s unknown just how much Trump will help bump up the stock throughout his term, I couldn’t be more bullish on AMZN shares as they finally look to break out in a meaningful way.
Sure, AMZN stock has been a big gainer since the stock market turned its corner in 2023. However, over the past five years, the e-commerce titan has not been all too much of a great performer, at least as far as Magnificent Seven names are concerned. With the recent crash of 2022 thrown in, AMZN spent all of 2023 and part of 2024 just recouping the losses.
Now that AMZN is gaining traction, perhaps the 132% gain in the past five years — that’s a gain that’s trailed the Nasdaq 100 — is no indication of the trajectory that could be ahead for Andy Jassy and company.
Key Points About This Article
- Amazon stock heated up following Trump’s presidential win.
- Could the Trump administration help power AMZN stock to a double in four years?
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
Amazon stock still looks incredibly cheap.
Perhaps the biggest reason for being more bullish on Amazon for the next four years, though, has less to do with Trump and more to do with the very modest valuation of its shares.
At the time of writing, AMZN stock goes for 32.5 times forward price-to-earnings (P/E). That’s pretty cheap for a disruptive technology company that’s commanded P/E multiples well north of 40 times. Of course, shares go for 42.5 times trailing P/E. But when considering the earnings growth that could be ahead, it’s hard to argue against Amazon being one of the cheaper Magnificent Seven options going into year’s end.
Like other players in mega-cap tech, Amazon is going big on AI investment. The digital retailer and cloud giant isn’t exactly the first name or even the second to come up when you think of an AI leader. That said, if there’s a company that can catch up, pull ahead, and disrupt with AI, it’s Amazon!
AI spending is key to growth.
Currently, Amazon is expecting to boat capital expenditures (or capex) in the ballpark of $300 billion, similar numbers as some of its Magnificent Seven rivals, including Microsoft (NASDAQ:MSFT), one of the AI top dogs. Undoubtedly, a big chunk of the cash will be going towards the AI tech we all know and love (chatbots) as well as the value-adding AI going on behind the scenes (think warehouse robots).
Moreover, Morgan Stanley (NYSE:MS) sees the big spend from big tech as driven by generative AI. That’s not at all surprising. And while higher AI budgets haven’t been as conducive to share price gains in recent quarters, I do think the Trump administration will change how investors view AI spending. I
t will take time for Trump to put his policies in place, but given his tone, it certainly sounds like he’s a tech-friendly guy. Either way, lower corporate taxes combined with lower interest rates may just set the stage where investors cheer higher AI spending, even if they’re mostly in the dark about what kind of return such big bets will incur.
Perhaps the bigger risk for tech firms is not spending enough on AI.
As Alphabet (NASDAQ:GOOG) CEO Sundar Pichai put it, “the risk of under-investing is dramatically greater than the risk of over-investing,” With potential Trump tax cuts and other favorable policies thrown into the equation, I believe Pichai will be proven right, even as investors become pickier with AI stocks and their roadmaps toward profitability.
Arguably, now is not the time to be thinking of profit maximization. There’s always time for that later on, in my opinion. For now, it seems to be more about “keeping up” with one’s top AI rivals in terms of spending. In this regard, Amazon seems poised to catch up on AI as it moves ahead with its numerous AI projects, from Project Amelia (e-commerce chatbot) to Olympus (a large language model with parameters measured in trillions).
So, can AMZN stock double under four years from Trump? I’d argue it has a better chance of doing so than other mega-cap tech titans as the firm launches its consumer-facing take on AI.
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