Artificial intelligence (AI) has been one of the most important investment themes in recent years.
While there are many ways to participate in this up-and-coming technology, one of the easiest ways is to look for companies that will benefit enormously from this technology.
In this article, we will explore one company that could fit into the above description — Amazon (NASDAQ: AMZN), the e-commerce and cloud computing giant.
AI and e-commerce
Launched as an online bookstore in 1995, Amazon came from nowhere to dominate the e-commerce business. It did this by making changes constantly to find out what would keep it growing. As AI gains the ability to do more, Amazon will likely shape its future operation further to take advantage of that and eventually solidify its leadership even more.
Let’s start with an obvious area where AI will be impactful — customer experience. AI is transforming customer experiences on Amazon by providing personalized recommendations based on individual preferences, purchase history, and browsing behavior. And thanks to ever-more-advanced algorithms, Amazon can deliver ever more targeted product suggestions, which should improve customer satisfaction and retention.
Another example is using AI-driven chatbots and virtual assistants to enhance customer service. These chatbots can reduce response time and provide relevant information to help solve customer queries, leading to better customer satisfaction.
But beyond these easily observable areas, AI is revolutionizing Amazon’s operation in a big way. For example, AI is helping Amazon with demand forecasting. By analyzing vast amounts of data, AI algorithms can help predict demand, allowing Amazon to maintain optimal stock levels at different locations at different points in time. The outcome is lower inventory cost, less stock-out, and ultimately better customer experiences.
Another central area of improvement that AI will bring is warehouse operations. AI-driven robots and automation technologies will help Amazon in aspects like picking and packing, leading to higher efficiency, lower cost, and faster order fulfillment.
In short, Amazon is already employing AI in many areas of its business and will likely use more of it in the future.
AI and cloud computing
Another area of Amazon that will likely see an enormous impact from using AI is its cloud computing business or Amazon Web Services (AWS). As a start, AI will help optimize AWS infrastructure and operations. AWS can leverage AI technologies to improve resource allocation, automate routine tasks, and enhance its cloud computing services’ overall performance and efficiency. This optimization will help AWS save costs (and pass on the savings to customers) and improve its service to customers.
More importantly, AWS can leverage advanced AI technology to offer customers machine learning (ML) and artificial intelligence (AI) services and solutions. These services empower businesses to leverage the most advanced AI capabilities without developing their infrastructure, reducing time to market and costs.
A recent example is the introduction of Bedrock, a cloud-based platform to help companies build generative AI applications like chatbots, text generation, image generation, etc. Using Bedrock, companies can leverage AI models from third parties like Stability AI, Anthropic, AI21 Labs, or Amazon’s in-house model Titan to build AI-powered tools. The result is lower investment costs and faster outcomes for companies in leveraging advanced AI tools to improve their operations.
And with the continued evolution and expansion of AI technology, investors can count on AWS to grow its suite of AI offerings in the future. A diversified offering, in turn, will attract and retain customers, which could expand AWS’s market share further.
Amazon is the AI stock to watch
Amazon is a leader in both e-commerce and its cloud computing business. The use of AI could further cement its position in these industries.
In e-commerce, AI is already transforming customer experience and improving operational efficiency. Meanwhile, AI is transforming AWS cloud offerings and driving new revenue opportunities.
And with its continuous investment in AI, Amazon is well-positioned to flourish in the AI-driven future.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.