Amazon’s cloud optimism boosts stock as it competes with Microsoft for AI market.
Amazon.com Sees 7% Rise as it Competes with Microsoft in the AI Market
By Aditya Soni
October 27, 2023 – 2:38 PM UTC
Amazon.com experienced a 7% surge in its stock price on Friday, driven by the growth of its highly profitable cloud business and its ambition to capture a larger share of the thriving artificial intelligence market, where it faces fierce competition from Microsoft.
The e-commerce giant, currently valued at $128 per share, was projected to increase its market capitalization by nearly $90 billion. In contrast, Microsoft saw a 1.5% rise in its stock price, while Alphabet experienced a 1.3% decline.
Amazon CEO Andy Jassy expressed confidence in the stability of the cloud business, citing significant expansions with existing customers and new agreements that are expected to drive growth in the final quarter of the year. Jassy also emphasized the immense revenue potential of artificial intelligence for Amazon Web Services (AWS), predicting “tens of billions of dollars” in the coming years.
The positive outlook for AWS, which generates the majority of Amazon’s profits, was well-received by Wall Street. Bernstein analysts stated in a client note, “Tech investors can breathe a sigh of relief,” and highlighted the potential for AWS growth even without AI.
Following this news, approximately 26 brokerages raised their price targets for Amazon, with a median view of $173, according to LSEG data. Despite a recent 8% decline over the past two days due to concerns about cloud spending, Amazon shares have rallied by 40% this year.
While Amazon’s cloud business is larger than that of Microsoft and Google, it is considered a laggard in the AI race. However, Amazon has taken steps to catch up, including strategic investments and the launch of its Bedrock AI service, which has attracted thousands of customers.
Analysts believe that generative AI could be a significant catalyst for growth within AWS. Global X analyst Tejas Dessai stated, ”We see some major partnerships secured in this quarter as key towards driving that growth in the coming quarters.”
Reporting by Aditya Soni in Bengaluru; Editing by Arun Koyyur
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What is the significance of Amazon’s launch of its own AI chip, Inferentia, in strengthening its position in the AI market?
O strengthen its position in the AI market. Last month, Amazon announced the launch of its own AI chip, Inferentia, which is aimed at improving the performance and cost-effectiveness of AI workloads on its cloud platform.
Furthermore, Amazon has been investing heavily in AI research and development, and has acquired several AI startups in recent years. The company has also been actively partnering with universities and research institutions to advance the field of AI.
However, Microsoft has been a dominant player in the AI market, thanks to its Azure cloud platform and its popular AI tools such as Azure Machine Learning and Cognitive Services. Microsoft has also been investing heavily in AI research and development, and has made significant breakthroughs in areas such as natural language processing and computer vision.
Competition between Amazon and Microsoft in the AI market is intensifying, as both companies recognize the immense potential of AI and its ability to transform various industries. With the increasing demand for AI applications in areas such as healthcare, finance, and autonomous vehicles, the AI market is projected to grow rapidly in the coming years.
Amazon’s entry into the AI market has the potential to disrupt the status quo and challenge Microsoft’s dominance. With its vast customer base and strong infrastructure capabilities, Amazon can leverage its existing cloud business to drive adoption of its AI services. The company has already attracted several high-profile customers for its AI offerings, including Netflix, Airbnb, and BMW.
However, Microsoft has a strong foothold in the enterprise market and has been successful in convincing large organizations to adopt its AI tools and services. The company has also been building strategic partnerships with other technology companies to expand the reach of its AI offerings.
As the competition between Amazon and Microsoft in the AI market heats up, it will be interesting to see how the two companies differentiate themselves and attract customers. Both companies have unique strengths and capabilities, and the battle for dominance in the AI market is far from over.
In conclusion, Amazon’s recent surge in its stock price reflects investors’ optimism about the company’s prospects in the AI market. While Amazon faces tough competition from Microsoft, the company’s strong position in the cloud business and its investments in AI research and development give it a competitive edge. As the AI market continues to grow, the competition between Amazon and Microsoft is expected to intensify, and both companies will be vying for a larger share of this lucrative market.
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