<div id="readability-page-1"><p>When it comes to opportunities in the artificial intelligence (AI) arena, big tech stalwarts such as <strong>Microsoft</strong>, <strong>Nvidia</strong>, <strong>Apple</strong>, <strong>Tesla</strong>, <strong>Meta Platforms</strong>, <strong>Alphabet</strong>, and <strong>Amazon</strong> <span>(AMZN<span> 1.92%</span>)</span> always seem to find a way to be in the spotlight.</p> <p>Known as the &#34;Magnificent Seven&#34;, these technology behemoths are leading the charge in the AI revolution in myriad ways. And while I see several benefits to invest in each, Amazon is by far my top pick.</p> <p>Over the last year, shares of Amazon have soared by 49% -- handily topping the <strong>S&amp;P 500</strong> and<strong> Nasdaq Composite</strong>. And yet despite these impressive gains, I think Amazon's party is just getting started.</p> <p>I'm going to dive into how Amazon is building an AI roadmap that should be watched closely. Moreover, I'll explore how the company's moves could impact the stock price over the next several years and make the case for why Amazon looks like a prime opportunity in the AI world right now.</p>  <h2>It takes money to make money</h2> <p>In my opinion, Amazon is a misunderstood business. The company's primary sources of sales and profits stem from its e-commerce marketplace and cloud computing infrastructure. However, both of these segments are quite exposed to macroeconomic forces such as inflation and interest rates. For this reason, Amazon can experience prolonged periods of inconsistent top- and-bottom-line growth.</p> <p>Nevertheless, despite these fluctuations across the financial profile, Amazon has made one thing clear: Management is not afraid to spend money.</p> <div><p><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MDQ0NzkvYW1hem9uLWNhcGV4LmpwZyZ3PTcwMA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="324" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MDQ0NzkvYW1hem9uLWNhcGV4LmpwZyZ3PTcwMA"/></p><p>Data source: Investor relations.</p> </div> <p>Amazon has been doubling down on its capital expenditure (capex) investments for a while now. On the surface, I understand why spending of this magnitude could cause some trepidation. But just look at Amazon's cash flow profile -- over the last year, the company has increased its operating cash flow and free cash flow by 57% and 123%, respectively.</p> <p>I'm going to dig deeper into where these capex investments are going and make the case for why Amazon's next growth wave is just getting started.</p> <h2>Amazon's business is accelerating, and it could kick into a whole new gear</h2> <p>According to the company's latest 10-Q filing, a good portion of the capex spend shown is being allocated toward &#34;investments in technology infrastructure (the majority of which is to support AWS business growth).&#34;</p> <div><table> <tbody> <tr> <th scope="col">Category</th> <th scope="col">3Q23</th> <th scope="col">4Q23</th> <th scope="col">1Q24</th> <th scope="col">2Q24</th> <th scope="col">3Q24</th> </tr> <tr> <td>Amazon Web Services revenue growth -- % year over year</td> <td>12%</td> <td>13%</td> <td>17%</td> <td>19%</td> <td>19%</td> </tr> <tr> <td>Amazon Web Services operating income growth -- % year over year</td> <td>30%</td> <td>39%</td> <td>83%</td> <td>72%</td> <td>50%</td> </tr> </tbody> </table></div> <p>Data source: Investor relations.</p> <p>Over the last year, Amazon has announced several initiatives, including building its own custom chipware, building its own data centers, and investing $8 billion into an AI start-up, Anthropic. If you take a look at the trends across Amazon's cloud business in the table, I think it becomes more clear that the company's capex investments are already generating a return.</p> <p>Furthermore, considering that Amazon's initiatives in data center and chip infrastructure are still yet to reach considerable scale, I think investors should be on the lookout for some breakout acceleration across the company's revenue and profitability over the next several years.</p> <div><p><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MDQ0NzkvZ2V0dHlpbWFnZXMtNDkxMzExNDAwLmpwZyZ3PTcwMA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="466" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MDQ0NzkvZ2V0dHlpbWFnZXMtNDkxMzExNDAwLmpwZyZ3PTcwMA"/></p><p>Image source: Getty Images.</p> </div> <h2>Amazon could emerge as the biggest AI winner of all</h2> <p>To me, the key that will unlock Amazon's next phase of growth is AI infrastructure. Notably, Dan Ives, who leads technology research at Wedbush Securities, is forecasting trillions to be spent on AI infrastructure over the next few years.</p> <p>These dynamics will be a major tailwind for cloud hyperscalers such as Amazon. This is a big deal, because the majority of Amazon's profitability stems from its cloud segment, AWS. My take is that as Amazon's profit margins widen and cash flow and earnings power compound, the company's valuation multiples should begin to expand considerably.</p> <p>Three years from now, I could see Amazon emerging as the most valuable AI company in the world. And yet right now, the stock is a downright bargain. Amazon trades at just 56 times its free cash flow, about half its five-year average.</p> <p>To me, now is an incredible opportunity to buy Amazon stock hand over fist. Better days look to be very much in store, and I think it's only a matter of time before more investors begin to catch on to the company's potential.</p>                                                                                             </div>

AMZN

<p>Amazon is positioned as a top investment in the AI sector, with shares rising 49% over the past year. Despite macroeconomic challenges, the company is increasing capital expenditures, particularly in technology infrastructure to support AWS growth. Analysts predict significant spending on AI infrastructure, which could enhance Amazon's profitability and valuation. Currently trading at 56 times its free cash flow, Amazon is seen as a bargain, with potential to become the most valuable AI company in three years.</p>

- The article discusses the potential of Amazon in the AI sector, highlighting its significant capital investments and recent stock performance.  
- It emphasizes Amazon's focus on technology infrastructure, particularly in its AWS segment, which is expected to drive future growth and profitability.  
- The author believes that Amazon is currently undervalued and poised to become a leading player in the AI market, presenting a prime investment opportunity.

Where Will Amazon Stock Be in 3 Years?