With the market starting to look skittish on pure-play AI businesses, many investors may currently be rethinking some of the tech stocks in their portfolios. In some cases, though, this may be more difficult than it seems on the surface. Many of the largest businesses involved in the growth of AI are also massive tech firms that built massively successful businesses long before the advent of generative AI.
A key example of this kind of stock is Amazon (NASDAQ:AMZN), an eCommerce behemoth that is now also becoming a major force in artificial intelligence. Is Amazon an AI stock, and does the business’s exposure to AI set it up as a disproportionate risk if the much-discussed AI bubble eventually pops?
Amazon’s AI Strategy 29% Share
While Amazon is using AI throughout its business, the main area in which it is being applied is in the AWS cloud computing segment. While other major tech businesses are competing in this area, AWS remains the largest cloud computing business with a roughly 29 percent market share. For reference, Microsoft’s Azure and Google Cloud are in the second and third positions, with market shares of 20 percent and 13 percent, respectively.
It’s also important to understand the somewhat unique AI strategy that Amazon is using at AWS. While many businesses are focused on building their own AI chatbots and other tools, Amazon has taken a more diversified approach by offering AWS users access to multiple different models through its Amazon Bedrock platform. While these include Amazon’s proprietary family of models, Bedrock also offers access to models like Claude and Stable Diffusion, among others.
This strategy, though different from many other tech majors, may prove to be beneficial for Amazon in the long run. By integrating various AI tools into its existing AWS cloud platform, Amazon has the potential to act as a bridge between the businesses creating AI models and the customers that need to put those models to work in existing enterprises. AWS’ infrastructure could also make it an important part of future AI development, as shown by a recent $38 billion partnership between Amazon and OpenAI that will allow the startup to use Amazon’s servers for advanced AI workloads.
AWS could prove to be a key growth driver at Amazon through next year, as analysts are expecting the business segment to deliver 20 percent growth in 2026. With AI workloads putting more and more demand on cloud resources and ongoing growth in cloud computing continuing apace, AWS could see substantial tailwinds over the next several years.
It’s also interesting to note that Amazon is investing in its own proprietary AI hardware. notably its Trainium line of chips. Designed specifically for AI training, these chips are more cost-effective for Amazon than GPUs from third-party manufacturers. Amazon is also combining these chips together into what it calls UltraServers. Anthropic, the business behind the Claude chatbot, has been a notable adopter of this proprietary hardware and is estimated to have its model running on over 1 million Trainium chips by the end of the year.
eCommerce Is Still King at Amazon
While there’s no doubt that Amazon is positioning itself to benefit from AI, it’s important to note that its core eCommerce business is still, by far, its largest revenue generator. In Q3, for example, net sales from the North American and International sales segments reached a combined total of $147.2 billion, accounting for more than 80 percent of the total quarterly net sales. AWS, by comparison, made up a much smaller share of revenue at just $33.0 billion.
It’s worth noting that AWS revenue did grow faster than Amazon’s other business segments, rising 20 percent compared to 11 percent in the North American segment and 14 percent internationally. AWS, however, may be starting to slip when it comes to its dominant market share. Recent data suggest that Amazon’s cloud service is losing some market share to smaller cloud providers like Nebius and CoreWeave. The fact that these providers are gaining in the market while Amazon is losing may indicate that specifically AI-focused cloud businesses could represent the wave of the future in cloud computing.
Even on the eCommerce side of the business, though, AI may prove to be a major contributor to efficiency and productivity. In conjunction with cutting-edge robotics, Amazon is deploying AI in its warehouses to aid human workers and increase the number of orders that can be picked and shipped. Likewise, Amazon has leveraged AI to create personalized product recommendations for its customers, helping to drive additional sales.
So, Is Amazon Really an AI Stock?
While much has been made of Amazon’s AI proficiency, the fact remains that AWS is still a relatively small part of its business. The cloud computing segment also appears to be suffering from some market share loss, though it’s far from impossible that Amazon could leverage its enormous resources to reverse that trend in the long run. Even so, Amazon probably isn’t best thought of in terms of being an AI stock.
What’s likely more accurate to say is that Amazon is an eCommerce and technology stock that could benefit substantially from AI as it integrates the technology with its existing businesses. Even with some market share erosion, AWS is still a major force in cloud computing, and Amazon’s approach of offering many different AI tools will likely prove popular with its customer base. Meanwhile, Amazon can keep using AI internally to help with everything from marketing to logistics in its eCommerce business.
Indeed, not being a pure-play AI stock could prove beneficial to Amazon at the moment. While AI stocks like NVDA and PLTR are still trading at very high valuations, the market is beginning to look more and more skeptical about whether pure AI businesses can support the share prices they’ve reached during the surge of the past couple of years. This could set some AI stocks up for considerable selloffs if the market sours on the technology.
Amazon, by contrast, is primarily an eCommerce business with a decent amount of AI exposure that is only trading at about 32.4 times its trailing 12-month earnings. As such, the more diversified nature of Amazon’s business could help to insulate the stock from an AI selloff if one occurs in the near future.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.