AMZN Analysis: Can Amazon Sustain Its 6-Month Highs?

Amazon stock is on a roll and is currently trading at its highest point in six months.

In fact, whilst a six-month high might seem enough of a reason to rejoice, Amazon’s absolute growth is even more remarkable when looked at from a percentage perspective.

Amazon stock has grown in value by a remarkable 43% since the beginning of this year, which outstrips its big-cap rivals by a huge margin.

Indeed, the average growth during the same period of similar-sized firms whose stocks are listed on the S&P 500 index has been approximately 10%.

It could be fair to say that much of the rising value of Amazon stock can be attributed to the company’s Amazon Web Services (AWS) internet and data services division, which is vast and has a data monopoly within many business sectors to which it provides hosted web services.

However, there is more to it than just a strong commercial demand for AWS's wide range of services.

The latest big thing is artificial intelligence (AI), and Amazon’s internet division is heavily invested in this to the extent that the company’s Gen-AI, which is an acronym for (Generational Artificial Intelligence) has higher pricing than other conventional computing services offered by Amazon; hence it could be perceived as a high driver of revenue during a time at which the demand for AI is booming.

If this high value is based on any notion that demand for a relatively highly-priced product such as commercially usable AI is driving the enthusiasm for Amazon stock, it is worth bearing in mind that this would represent a turning point compared to the pessimism that pervaded the market last month.

In April, many analysts were looking at Amazon stock with more than a degree of trepidation after the company announced that it was about to launch a major program of restructuring, including plans to fire 27,000 employees.

This resulted in a downward direction for Amazon stock, and, looking back before the beginning of 2023, Amazon stock was at a higher point than it is today.

Therefore, just looking at the past six months and a possible extra revenue stream in the form of AI is not enough to consider that Amazon’s upward trajectory is sustainable.

The job cuts which were announced just last month were significant. That is a large number of staff, and restructuring of that nature is never done lightly.

Should the AI world become saturated with competition – there are already lots of AI development projects underway with huge VC investment – then this flagship product may find itself in a crowded marketplace.

Amazon’s executives stated that uncertainty in the current economy and that of the near future had been a major factor in deciding to streamline the global business.

Volatility is the lifeblood of the markets. However, how it is presented matters, and presenting a euphoric view that Amazon is rocketing is to see just part of the picture.