A few years from now, you’ll probably want to follow billionaire investors and invest in these stocks.

It is rare to find a company that holds a dominant market leadership position in not one but two completely separate industries. Amazon.com (AMZN 0.83%) It’s in that category. The e-commerce platform is bigger than the following 10 competitors: combinedAmazon Web Services (AWS) has a strong advantage over other major cloud platforms.

As my colleague Sean Williams pointed out in a recent article, more than eight billionaire investors bought Amazon stock in the fourth quarter of 2023, including Citadel’s Ken Griffin. And this isn’t just a recent phenomenon. Warren Buffett is in control. Berkshire Hathaway He owns shares of Amazon, as do prominent billionaires David Tepper and Stanley Druckenmiller.

I would never suggest buying a particular stock just because billionaires do, but there’s a lot to like about Amazon. I have added the stock to my portfolio several times over the past few years and believe that patient investors will be rewarded with this impressive business.

Recent performance is strong

Amazon had a very strong performance in its most recent earnings report. It significantly exceeded expectations on both top and bottom lines, and CEO Andy Jassy’s focus on efficiency helped the company’s bottom line jump to $10.6 billion, compared to $278 million in revenue in the fourth quarter of 2022. Sales increased 14% year-on-year. A particularly solid holiday season gave us a boost throughout the year.

Amazon’s business has expanded wonderfully everywhere. Amazon Web Services (AWS) growth increased by 1 percentage point sequentially, with North American and international e-commerce sales up 13% and 17%, respectively. Although nearly 85% of Amazon’s revenue comes from e-commerce, it’s important to remember that AWS accounts for the majority of the company’s operating profits.

Advertising also continues to be an impressive source of high-margin revenue, with advertising revenue growing 27% year-over-year in the fourth quarter. Additionally, it’s worth noting that Amazon began running ads on Prime Video content in January. So this number could continue to grow rapidly.

There is great growth potential in the future

There could be tremendous growth potential on both sides of Amazon’s business. For one thing, e-commerce only accounts for about 15% of U.S. retail sales, and this percentage is even lower in some of the international markets where Amazon operates. And there’s a lot of long-term potential to expand our advertising business.

On the AWS side, the global cloud computing market is expected to quadruple from 2023 levels to $2.40 by the end of 2010. sunshine market up to that point.

AWS could have particularly big opportunities as generative AI technology advances. Executives said there has been a lot of interest in AWS’s generative AI products, such as the enterprise “Q” chatbot, and Jassy said AI could generate “tens of billions of dollars” in revenue over the next few years. Amazon develops its own AI chips and has a platform for building AI applications, among other initiatives.

Moreover, it’s not just that Amazon’s business has a lot of room to grow. There are also ample opportunities to improve efficiencies and expand margins, especially on the e-commerce side. The rapid growth of advertising will certainly help, and Amazon is also improving the efficiency of its fulfillment network. A continued focus on efficiency is a top priority for Jassy.

How big can Amazon get?

Amazon is one of the “Magnificent 7” companies and, with a market capitalization of $1.8 trillion, is already one of the world’s largest companies. But there’s a solid case to be made that Amazon could double or even triple its size within a decade if it can capitalize on both growth and profitability opportunities. A lot can happen, but I wouldn’t be surprised to see Amazon ultimately become the first $5 trillion market cap company.