This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
The market has been an incredible wealth-building machine over the past few decades, and the S&P 500 has delivered an annualized gain of 10.7% over the past 20 years. If you've been investing consistently in a carefully curated stock portfolio over a long period of time, you've likely benefited from these gains, and if you start now, you should reap the rewards over the next few decades.
Often, there's one stock in a full portfolio that does most of the heavy lifting. Amazon (NASDAQ: AMZN) has been that stock for many investors, gaining more than 13,000% over the past 20 years alone. If you'd invested $10,000 in Amazon stock at that time, you'd have more than $1 million today. Can Amazon stock still set you up for life?
AI, e-commerce, and more
Amazon is known for e-commerce, which is its biggest segment. It accounts for around 40% of all U.S. e-commerce and also has a massive international business. It is constantly launching new features and services to keep its dominant spot, and it continues to improve its fulfillment speed. Its new regional warehouse design is keeping more products closer to more shoppers, making the last-mile delivery that much faster.
Amazon is also always adding new products to ensure that its Prime customers rely on it for an increasing portion of their purchases. It's moving upscale, adding partnerships with Saks Fifth Avenue and Dolce & Gabbana in the first quarter.
E-commerce is increasing as a percentage of retail sales, and Amazon stands to gain perhaps more than anyone else. In the first quarter, according to the U.S. Department of Commerce, e-commerce accounted for 16.2% of sales in the 2025 first quarter, up from 15.9% last year.
Beyond e-commerce, though, lies its greatest opportunity today, which is artificial intelligence (AI). The AI opportunity is expected to increase at a compound annual growth rate of more than 26% through 2030, and Amazon is developing a comprehensive AI business through Amazon Web Services, its cloud computing segment. AWS itself is driving high growth for the company, and sales were up 17% over last year in the first quarter. The AI business is already bringing in billions for Amazon, and CEO Andy Jassy envisions a shift over the next 20 years or so in which companies switch their tech spend to the cloud to participate in generative AI.
AWS is also responsible for most of Amazon's operating income. It accounted for 63% in the first quarter, driving total operating income of $18.4 billion, a 27% increase year over year.
These are compelling growth businesses, and they don't even include advertising, which is Amazon's fastest-growing business, and some of its smaller businesses. It's in the process of rolling out a satellite broadband business called Project Kuiper, and it's already launched satellites into space, with the goal of offering services, particularly in underserved regions, by the end of the year.
The fourth-largest company in the world
As large as it is today, and it's the second-largest company by sales behind Walmart, Amazon still has huge growth opportunities. But even with all of them, can Amazon stock still deliver life-altering gains?
Usually in these cases, I'll propose different kinds of scenarios to get a hypothetical sense of the potential compound annual growth rate (CAGR) and valuation to see if, realistically, investors can expect a certain outcome. In this case it's easy, because Amazon is already so big. To double, it would need to reach a market cap of $4.6 trillion, and to triple, $6.9 trillion. Although it looks like we're heading in that direction, that's going to take a long time. Keeping the price-to-sales ratio constant, that implies sales doubling or tripling from the current $650 billion, which is massive. At a CAGR of 10%, which is generous over 10 years, sales would reach nearly $1.7 trillion, and market cap would be $4.6 trillion. Unless you invest a huge amount of money to start with, Amazon isn't going to be your ticket to millions.
It could still be an excellent component of a diversified portfolio, but Amazon stock isn't likely to set you up for life.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
