Over the last decades, big tech has been one of America’s greatest wealth-creation engines. With shares up by over 240,000% since hitting public markets in 1997, Amazon (AMZN -0.45%) is a quintessential example of this trend.

However, past performance doesn’t guarantee future results. Let’s explore this e-commerce behemoth to determine what the future could have in store.

A leaner and meaner business

Under the leadership of CEO Andy Jassy, who took the helm from Jeff Bezos in 2021, Amazon has shifted its strategy from growth at all costs to prioritizing profitability. The company has slashed thousands of white-collar positions, streamlined its fulfillment network, and trimmed less-profitable business ventures. These efforts have transformed its bottom line.

While Amazon’s net sales rose 11% year over year to $158.9 billion, operating income surged by an impressive 55% to $17.4 billion. This was helped by the core U.S. e-commerce segment, where much of management’s cost cutting occurred.

The company also enjoys a new growth driver in its Amazon Web Services (AWS) division, which generated 60% of the company’s operating income ($10.4 billion) in the period.

AWS specializes in cloud computing, a business model that provides computing power, storage, and other services online. Originally built to host Amazon’s vast internal data and storage needs, AWS has become the company’s key growth driver, allowing it to participate in tech’s hottest new opportunities like generative artificial intelligence (AI).

Pivoting to new growth engines

AWS has allowed Amazon to become an early leader in AI, competing with other tech giants like Microsoft, Alphabet, and Meta Platforms, which are all investing heavily in training and inference hardware for large language models (LLMs).

It is too early to say which company is winning this race, but as the world’s largest cloud service provider (with a market share of 31%), Amazon will likely have an easier time monetizing the new technology compared to its rivals.

The AI business mainly involves renting out Nvidia computing power to cloud clients, which use it to power their generative AI workloads.

The company is also investing in its custom chips (Trainian and Inferentia), which can offer better price performance because they are tailored for specific tasks. Management claims the opportunity is growing three times as fast as cloud computing did at this point in its evolution.

Image source: Getty Images.

However, while the AI infrastructure market is rapidly expanding, many consumer-facing applications are not necessarily profitable. So it’s still too early to know whether this AI boom will be a temporary hype cycle or a reliable source of long-term growth for Amazon’s AWS segment.

Taking on Shein and Temu

Amazon’s growth strategies aren’t limited to AWS. The company is also exploring a new e-commerce marketplace called Haul, designed to compete with low-priced Chinese rivals like Shein and Temu. The platform will focus on similar fashion, home, and lifestyle goods below $20 (with most under $10) and remain competitive by shipping directly from China.

This new e-commerce vertical probably won’t be a game changer for Amazon. However, it could protect the company from competition and help it maintain its dominant 40% market share in U.S. e-commerce.

Is Amazon still a millionaire maker?

When I think of a millionaire maker, I envision a stock poised to double or even triple in a few years. Despite its diversified growth drivers, Amazon doesn’t seem to fit that category. Cost cutting has its limits. And the company’s recent gains in operating profitability will probably slow down over the coming years because of more challenging quarter-over-quarter comparisons.

That said, with a forward price-to-earnings ratio (P/E) of 34, Amazon looks like a reasonably good value. That is only a slight premium over the Nasdaq 100 estimate, which seems fair considering the company’s dominant positions in e-commerce, cloud computing, and AI.