Amazon Prime Day is no longer a major driver for the company’s stock as it was back in 2015. Instead, investors are focused on its cloud computing division which shows how fast the tides are changing in the direction of artificial intelligence (AI).
Amazon Prime Day Loses Its Stock-Driving Power
In 2015, when Amazon has its first Prime Day, the company saw an 8.9% increase in its shares. This was in addition to the massive $900 million sales the company made in the 48-hour period. Over the first four years, data by Bloomberg shows that the company continued to gain 2% on average in stock.
However, the past four years have been of no profit to the company’s shares. In fact, the stocks fell by 2.3%, 0.4%, 2.5%, and 1.7% in 2019, 2020, 2021, and 2022 respectively despite the massive sales the company saw in the same years.
On the other hand, Amazon Web Services has been rising to become the company’s primary source of operational income. This has mainly been due to the heightened investor focus on whoever stands to gain the most from the implementation of artificial intelligence applications.
According to Eric Clark, portfolio manager of Accuvest Global Advisors, in an interview with Bloomberg, “most people invest in Amazon for both” e-commerce and AWS. However, with “AI being part of the conversation kind of almost every minute of every day, it’s clearly the AWS opportunity and the potential AI implications” that are turning out to be more alluring.
Based on a prediction by JPMorgan, this year’s Prime Day which began today is expected to generate over $5 billion in additional revenue. With this, the company will have gained 13% over last year’s Prime Day.
Notably, this is still low compared to the 30% increase that was attained in 2020 courtesy of the COVID-19 lockdown which resulted in a surge in online shopping.
AWS Takes the Amazon Prime Day Spotlight
Last year, about 66% of Amazon’s sales came from its retail division. However, the company’s $12.2 billion operating profit was entirely attributable to its faster-growing AWS division. The first quarter was not as successful for the cloud division resulting in a record low. Regardless, analysts are confident that demand for generative AI applications will resurge, boosting sales.
By releasing generative AI technology for cloud users and building an AI marketplace with tools from other businesses, Amazon hopes to capitalize on this demand.
The company is also investing $100 million in helping clients to develop and deploy new AI products. This serves as a competitive edge for the company against Microsoft’s and Alphabet’s cloud computing divisions.
Amazon has been struggling to raise the value of its stock over the past year. After its prime in 2021, the company’s shares fell by close to 50%. Although it has increased by 55% since last year, Amazon’s stocks are still 30% below its highest-ever price.
Co-founder and chief investment officer of Defiance ETFs, Sylvia Jablonski, sees Prime Day as a marketing chance to draw new clients to Amazon’s online offerings. She does, however, think that AWS’s role in the development and creation of AI is crucial to the future.
Battle On All Fronts
Aside from the AI hype which has affected investors, Amazon’s Prime Day has also lost its shine in the eyes of consumers. This year, the retailer’s competitors pose steeper competition, with simultaneous sales events from Chinese online discounters Shein and Temu.
In addition to offering massive discounts, Shein has also resulted in directly copying Amazon’s e-commerce technique by allowing third-party sellers. This has enabled the platform to have more diversity in its products making it more appealing to consumers.
On the other hand, some Temu vendors have also copied specific Amazon sellers’ storefronts. Additionally, they are selling the same products as Amazon vendors for significantly lower prices.
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