Many technology stocks have seen a surge in the past year thanks to the enthusiasm for artificial intelligence (AI). The e-commerce giant Amazon (AMZN -0.30%) was no exception.

Amazon stock rose from a 52-week low of $118.35 last year to a high of $201.20 in July. But the stock’s resurgence hasn’t depended solely on AI.

There are other reasons to invest in the e-commerce heavyweight besides its AI ambitions. And now its share price has fallen along with the recent decline in the overall stock market, providing an opportunity to buy shares well below their 52-week high.

Here are three factors that make Amazon a great stock to buy and hold for the long term.

Amazon shares its supply chain expertise

On its journey to becoming a dominant player in e-commerce, Amazon has had to build an impressive infrastructure to meet its supply chain goals, such as fast shipping speeds. For example, the company uses AI to manage an army of over 700,000 robots in its warehouses that process customer orders around the clock.

Realizing that this is no small feat for businesses, Amazon decided to transform its e-commerce infrastructure from a cost model into a revenue stream. Last fall, the company launched Supply Chain by Amazon, offering its diverse logistics capabilities to third-party sellers.

According to CEO Andy Jassy, ​​”this group of companies is growing very strongly.” In fact, the company has spent years increasing its revenue from third-party sales, which now make up a significant portion of Amazon’s revenue.

Since Mr. Jassy became CEO in 2021, fees collected by Amazon from third-party services have increased from $103.4 billion in 2021 to $140.1 billion in 2023. In the second quarter, this part of Amazon’s business accounted for nearly a quarter of its $148 billion in revenue.

Amazon’s dominance in digital advertising

Amazon is one of the most visited websites in the world. Its consumer base provides advertisers with a huge audience to reach, driving the growth of the company’s advertising business.

Today, Amazon ranks third in the world in terms of digital advertising market share. As a result, the company generated advertising revenue of $12.8 billion in the second quarter, an increase of 20% year over year.

The advertising business is expected to continue to grow. The company started selling ads on its Amazon Prime Video service this year. The service has a significant audience, which is desirable for advertisers considering that Amazon’s market share is among the largest in the video streaming industry and competitors Netflix.

In addition, ad sales contribute to Amazon’s profits. According to CFO Brian Olsavsky, “advertising remains an important contributor to profitability in the North American and international segments.”

Amazon’s other bets

To further expand its business, Amazon is taking the bold step of bringing the internet to the billions of people around the world who don’t have reliable broadband access. The company is doing this by putting satellites into orbit that can get consumers online. Test launches last year were successful and the company plans to start deploying satellites later this year.

Amazon also ventured into the multi-trillion-dollar healthcare business. Last year, the company bought digital healthcare platform One Medical and launched a prescription drug subscription service in 2023. This year, the program expanded to Medicare members.

There are many other reasons to buy Amazon stock. For example, the company’s AI capabilities are off to a good start. Mr. Jassy explained: “Despite being in an early stage, our AI business continues to grow rapidly and generates multi-billion dollar revenue.”

Thanks to AI, Amazon Web Services (AWS), which provides companies with IT infrastructure such as cloud computing, was able to increase its net revenue by 19% year-on-year to $26.3 billion in the second quarter.

The company is taking its AI efforts to the next level by producing its own AI-optimized semiconductor chips. According to Mr. Jassy, ​​“Demand for our custom silicon, training and inference products is quite high as they offer favorable price/performance compared to the available alternatives.”

In addition, Amazon is investing in these other business areas while improving its finances. Not only did net sales increase 10% year-over-year to $148 billion in the second quarter, but net income reached $13.5 billion, double the $6.7 billion of the previous year.

This resulted in Amazon’s diluted earnings per share (EPS) rising to $1.26 in the second quarter, compared to $0.65 in 2023. At the same time, free cash flow (FCF) over the last 12 months rose from $7.9 billion in the second quarter of 2023 to $53 billion this year.

At the time of writing, Amazon stock is well below its 52-week high, so now is a good time to buy some shares. Wall Street analysts agree. Their current consensus is a buy rating with a median price target of $220 for Amazon stock.

The company’s numerous opportunities to grow its business – especially in huge markets like healthcare and artificial intelligence – make Amazon an attractive long-term investment.