Amazon (NASDAQ: AMZN) dominates the cloud infrastructure sector, driving the artificial intelligence revolution, and stands as the global e-commerce leader. It is also the world’s largest company by revenue, having generated over $716 billion in sales last year.
Despite these strengths, Amazon has underperformed recently, climbing approximately 47% over the past five years. Only Tesla has fared worse among the “Magnificent Seven,” posting a 46% gain over the same period.
Meanwhile, the S&P 500 rose 69% and the Nasdaq Composite advanced 71% during that timeframe. Although Amazon has lagged behind the broader market, I believe it has a strong likelihood of reaching a $4 trillion market capitalization alongside Nvidia, Apple, and Alphabet before 2029. Here is why.
Amazon Poised for Significant Growth
With a current market capitalization of roughly $2.75 trillion and ranking as the world’s fifth-largest company, Amazon needs a 45.5% stock increase to reach a $4 trillion valuation. Achieving this over the next two years would require an average annual growth rate of 20.6%.
Despite being at the forefront of the AI revolution, Amazon remains underappreciated as an AI stock, even though it continues to deliver strong results. The company’s cloud infrastructure segment, Amazon Web Services (AWS), grew sales by 37% year-over-year to $42.2 billion in the second quarter. AI-related demand helped the unit achieve its strongest growth rate since 2021, surpassing analyst estimates of roughly 31% growth and $40.54 billion in revenue.
Concurrently, the North America segment, which is heavily weighted toward e-commerce, saw revenue increase 16% year-over-year. Total company revenue grew 20% to $200.6 billion for the quarter. Amazon’s sales growth is accelerating once again, and there are compelling reasons to believe the business is still in the early stages of capitalizing on AI-related tailwinds.
The company’s heavy emphasis on e-commerce typically results in lower margins compared to most of the “Magnificent Seven” companies. However, its massive online retail sales base offers substantial room for optimization. Through ongoing advancements in automation and robotics, Amazon is expected to harness efficiency improvements that will unlock stronger e-commerce margins. Combined with continued expansion in its digital advertising unit, Amazon’s business engines have never been stronger, providing the foundation needed to hit a $4 trillion market cap by 2029.
Of course, this projection assumes that the overall market remains relatively healthy. If macroeconomic conditions deteriorate and broader market valuations decline significantly, it is reasonable to expect that Amazon’s valuation will face pressure, even if its business results continue to look strong.
