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Amazon (AMZN -0.63%) has dropped out of the spotlight this year as its big tech peers, Microsoftand Google parent Alphabet, fight an intense battle over artificial intelligence (AI).

Microsoft recently acquired a large stake in OpenAI, and it has integrated the ChatGPT chatbot into its Bing search engine and Azure cloud platform. Google has fired back with a chatbot of its own, called Bard.

But investors shouldn't ignore Amazon as a major player in this emerging industry, because Amazon Web Services (AWS) is the world's largest cloud platform, and the cloud is where most AI applications are developed and deployed.

Now, AWS plans to open a new program to support businesses in crafting their AI strategies, and it could be a major growth driver for the company going forward. Here's why it's time for investors to buy in.

Image source: Getty Images.

Artificial intelligence comes in many forms, and it's often used to ingest mountains of data in order to make predictions about future events. But generative AI is the version many consumers have become familiar with this year, and is capable of generating new content whether it's text, sound, images, or videos. Platforms like ChatGPT and Bard fall into that category.

OpenAI CEO Sam Altman says he's already seeing many businesses double their productivity using generative AI, and it has the potential to eventually deliver an increase of 30 times. It's because the technology can be prompted to instantly write computer code, or even generate creative works. It can also rapidly analyze thousands of pages of information and deliver answers to complex questions, which saves the user from scrolling through search engine results.

On Thursday, June 23, Amazon announced it was launching the AWS Generative AI Innovation Center with $100 million in funding. The program will connect businesses with AWS strategists, data scientists, engineers, and solution architects to help them design generative AI strategies and deploy the technology effectively and responsibly.

The program will provide no-cost workshops, engagements, and training to teach businesses how to use some of the most powerful AI tools available on AWS, like CodeWhisperer, which serves as a copilot for computer programmers to help them write software significantly faster.

Amazon says a handful of companies were already signed up, including customer engagement platform Twilio, which is using generative AI to help businesses provide deeper value to the people they serve.

AWS is one of the oldest data center customers of Nvidia, which currently produces the most powerful chips in the industry designed for AI workloads. The two companies recently signed a new deal to power AWS' new EC2 P5 infrastructure, which will allow its cloud customers to scale from 10,000 Nvidia H100 GPUs to 20,000, giving them access to supercomputer-like performance.

Overall, this could enable them to train larger AI language models than ever before, with far more precision and speed.

Here's my point: The more customers using that data center infrastructure, the more money AWS makes. Therefore, Amazon's $100 million investment in the Generative AI Innovation Center could result in multitudes of that amount coming back as revenue, as more businesses learn how to train and deploy AI. Also, the free training and access to expert engineers could make AWS an attractive on-ramp into the world of AI for many organizations, prompting them to shun other providers like Microsoft Azure and Google Cloud initially.

Estimates about the future value of the AI industry are wide-ranging, but staggering even at the low end. Research firm McKinsey & Company thinks the technology will add $13 trillion to global economic output by 2030, whereas Cathie Wood's Ark Investment Management places that figure at a whopping $200 trillion.

Therefore, it's no surprise tech giants are jostling for AI leadership, but AWS will approach the opportunity from a position of strength since it already sits atop the cloud industry.

Amazon is a very diverse business beyond the cloud; it also dominates e-commerce globally, has a fast growing digital advertising segment, and is a leader in streaming through its Prime and Twitch platforms. The company has generated $524 billion in revenue over the last four quarters, which is far more than Microsoft and Alphabet, yet Amazon stock trades at a cheaper price-to-sales (P/S) ratio than both of them.

Company

2022 Revenue (Billions)

Price-to-Sales Ratio

Amazon

$524

2.5

Microsoft

$208

12.0

Alphabet (Google)

$284

5.5

Source: Company filings.

As a result, investors can buy Amazon stock now at a very attractive valuation relative to its peers, which theoretically means it could deliver more upside in the long run. In fact, I think Amazon is on its way to a $5 trillion valuation within the next decade, and AI could supercharge its progress to reach that target even more quickly.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fools board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fools board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon.com, Microsoft, Nvidia, and Twilio. The Motley Fool has a disclosure policy.

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