Is Amazon Stock Worth Holding Now on NOVA AI's Potential?

Amazon's AMZN recent announcements highlighting its Nova AI capabilities present a compelling but nuanced investment case. Investors should consider maintaining current positions rather than increasing exposure as the tech giant navigates its AI transformation through 2025.Nova AI: Amazon's Strategic AI EvolutionAmazon has expanded access to its Nova foundation models through nova.amazon.com, marking a significant step in its artificial intelligence strategy. The company also introduced Amazon Nova Act, a new AI model trained to perform actions within web browsers, along with the Amazon Nova Act SDK for developers to experiment with this early model.This move puts Amazon in direct competition with OpenAI's Operator and Anthropic's Computer Use tools in the rapidly evolving agentic AI space. Reportedly, Nova Act outperforms competitors on several internal tests, scoring 94% on ScreenSpot Web Text compared to OpenAI's 88% and Anthropic's 90%.AMZN Q4 Financial Performance Signals StrengthAmazon's fourth-quarter 2024 results demonstrate robust performance across all business segments. The company reported revenues of $187.8 billion, up 10% year over year, with operating income reaching $21.2 billion, which increased 61% from fourth-quarter 2023.AWS continues to be a standout performer, up 19% year over year to $28.8 billion, with an annualized revenue run rate of $115 billion. This growth is impressive considering capacity constraints that could be limiting even greater expansion.The Zacks Consensus Estimate for 2025 net sales is pegged at $697.68 billion, indicating growth of 9.36% from the prior-year reported figure. The Zacks Consensus Estimate for 2025 earnings is pegged at $6.32 per share, which indicates a jump of 14.29% from the year-ago period. The figure has remained unchanged over the past 30 days.Image Source: Zacks Investment ResearchFind the latest earnings estimates and surprises on Zacks Earnings Calendar.Capital Investment Signals Long-Term AI Goals by AMZNAmazon's AI ambitions reflects upon its capital expenditure plans. The company invested $26.3 billion in capital during fourth-quarter 2024 and expects similar quarterly investment levels through 2025, primarily directed toward AWS and AI infrastructure.This significant investment includes Project Rainier, a collaboration with Anthropic to build a cluster of Trainium 2 ultra servers containing hundreds of thousands of Trainium 2 chips. This cluster will have five times the computing power of the one Anthropic used to train their current leading cloud models.AMZN’s Valuation and Competitive LandscapeDespite strong fundamental performance, Amazon's valuation metrics raise questions about near-term upside potential. The company's forward 12-month Price-to-Sales ratio of 2.85X stands significantly higher than the Zacks Internet - Commerce industry average of 2.11X, suggesting the stock may be fully valued at current levels.AMZN’s P/S F12M Ratio Depicts Stretched ValuationImage Source: Zacks Investment ResearchMeanwhile, competition in agentic AI is intensifying rapidly with significant advancements in the field by tech giants, including Microsoft MSFT, Nvidia NVDA and Alphabet GOOGL-owned Google. Microsoft is integrating advanced AI agents into its business applications with new security capabilities being rolled out through Microsoft Security Copilot. Google's collaboration with NVIDIA on next-generation AI hardware will power advanced reasoning models, while NVIDIA itself has launched its Llama Nemotron family of reasoning models specifically for agentic AI platforms. The partnership between LTIMindtree and Google Cloud further demonstrates how enterprise adoption of agentic AI is accelerating across industries. Amazon will need to demonstrate meaningful revenue generation from Nova Act to justify its premium valuation amid this increasingly competitive landscape. With a 5.7% return in the past six months, AMZN has outperformed both the broader Zacks Computer & Technology sector and the S&P 500, which declined 5.8% and 1.4%, respectively.Shares of Alphabet, Nvidia and Microsoft have also underperformed Amazon, declining 5.3%, 10.3% and 8.2%, respectively, in the same time frame.6-Month PerformanceImage Source: Zacks Investment ResearchHere’s Why Investors Should Hold AMZN StockDespite substantial investments in AI infrastructure, Amazon's AI-specific revenue streams remain in early developmental stages, with uncertain timelines for meaningful financial impact as the company builds capacity ahead of monetization. AWS growth faces moderation from ongoing supply chain challenges, including chip availability and power constraints, though these limitations are likely to begin easing in the second half of 2025. Valuation considerations also warrant caution, as Amazon's strong 2024 performance may already fully reflect near-term growth expectations in current stock prices. Furthermore, the intensely competitive landscape in agentic AI features well-resourced rivals like OpenAI, Anthropic, and Google, creating significant uncertainty around which companies will ultimately capture the largest market share in this emerging technology sector.The Path Forward for AMZNFor current Amazon shareholders, the company's strategic AI investments and continuing cloud dominance provide compelling reasons to maintain positions through 2025. The company's profitability improvements across all segments demonstrate operational discipline alongside aggressive AI investment.However, investors looking to establish new positions might benefit from patience, watching for either temporary market pullbacks or clearer evidence of Nova AI monetization success before increasing exposure. Amazon's long-term AI vision remains promising, but the transformation will likely unfold gradually throughout 2025 and beyond. AMZN currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks