Amazon has a moat in its size and brand name, making it tough for any competition.
It has incredible opportunities across its businesses, but specifically in AI.
Shares of the e-commerce and tech giant are trading at an attractive price today.
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It’s hard to believe that Warren Buffett’s time as CEO of Berkshire Hathaway is coming to an end. The legendary investor took the holding company from a textile manufacturer in 1965 to become one of the largest companies on the planet today, owning more than 100 businesses and with an equity portfolio worth more than $300 billion.
Berkshire Hathaway stock has wildly outperformed the market over these past few decades, delivering a total gain of 5,502,284% in per-share market value vs. 39,054% for the S&P 500. Today, Berkshire Hathaway has joined the ranks of the $1 trillion market cap club, and investors everywhere follow Buffett’s trades and guidance to become more successful investors.
Most Buffett holdings are the antithesis of the hot growth stock. Buffett is known for his value approach to investing, and he steers clear of high-risk stocks or technology that he’s not familiar with. But at least one stock that the broader investing community and Warren Buffett can agree upon is Amazon (NASDAQ: AMZN).
There are several features Buffett loves in a great stock, and one of them is a moat. An economic moat ensures that the business has a product or service that stands out and a leg up on the competition. Amazon’s size and name give it a competitive edge, so even though it’s not the classic Buffett stock, it has some clear features that fit the mold.
Its core business is of course e-commerce, and it has almost 40% of the market share in the U.S. That’s a massive amount of market share for any business, and Amazon can do so much to keep its share because it’s so large and has so many resources. It hasn’t reported the number of Prime members it has in a while, but it’s estimated at 220 million to 240 million. These members rely on it for their everyday essentials and more, and the membership model generates loyalty and repeat purchases.
It also drives growth in its advertising business, since advertisers get access to Amazon’s hundreds of millions of Prime members where they’re already shopping and ready to make a purchase. More recently, Amazon has developed a robust video ad business for its Prime streaming platform, and it’s also expanding the business outside of the Amazon platform.
Amazon’s market share lead isn’t quite as big in cloud computing, but it’s still hefty at 30% of the global market, well ahead of Microsoft Azure’s 20%.
Amazon is in constant growth mode to stay on top of its game in all of its categories. Its greatest opportunities today lie in generative artificial intelligence (AI) through its cloud business, Amazon Web Services (AWS). Amazon is investing hundreds of billions of dollars in developing the most competitive generative AI capabilities to meet every kind of demand, from the small business through its large enterprise clients.
Its signature AI service is called Bedrock, which provides access to a plethora of large-language models (LLM) for clients to customize, but it also has tools for developers to build their own LLMs and for small businesses to use ready-made solutions.
The AI business already has a $123 billion run rate, and CEO Andy Jassy pointed out, “How often do you have an opportunity that’s $123 billion of annual revenue run rate where you say it’s still early?”
Indeed, independent sources point to a massive long-term opportunity. According to Grand View Research, the AI market is expected to reach $3.5 trillion by 2033, growing at a compound annual growth rate (CAGR) of 31.5%. What we see today continues to grow at a pace that’s hard to keep up with as generative AI moves from wonky results to near-human content creation.
Amazon and its peers are using enormous loads of data to access new levels of training, inference, and reasoning, reaching new capabilities that could further revolutionize daily life. The way it’s going, AI could eventually take over as Amazon’s larger business and launch its stock into new territory.
Despite its immense size, Amazon’s revenue is still growing by double digits — 12% in the second quarter. That’s quite a feat, and with the potential for the AI business, it could keep that up for a while. However, there’s some uncertainty in the business due to tariffs and lawsuits, and the market has soured on Amazon stock recently; it’s roughly flat this year, despite the ongoing opportunities.
At the current price, Amazon stock trades at 29 times forward, 1-year earnings, which is an attractive entry point for new investors. If you’ve been on the fence, now could be a fantastic time to take a position in this no-brainer stock.
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
1 No-Brainer Warren Buffett Stock to Buy Right Now was originally published by The Motley Fool
