Amazon (NASDAQ: AMZN) stock – my largest portfolio holding – is on a tear at the moment. Had an investor put £3,000 into the e-commerce and cloud computing powerhouse a month ago, that capital would now be worth approximately £3,900.

Can the Magnificent 7 stock continue to climb from here? Let’s take a look at the set-up.

Investors are now seeing Amazon’s potential

The main driver of Amazon stock over the last month – looking beyond the general improvement in investor sentiment – has been the company’s annual letter to investors, which was posted on 9 April. This was literally a game changer.

In this letter, CEO Andy Jassy outlined some potential growth drivers for the company. He also provided some insights into the performance of different areas of the business.

Perhaps the most important part of the letter was discussion of the company’s AI chip business. This is now doing $20bn in annual revenue, and growing at a triple-digit rate year on year (ie, faster than Nvidia).

However, Jassy noted that if Amazon’s chip business was a standalone company, and produced chips for third parties, revenue would be around $50bn annually (close to what Broadcom is doing in AI product revenue). I have no doubt that this comment has boosted the share price.

Another important part of the letter was discussion of the company’s low earth orbit space business, Amazon Leo. This now has more than 200 satellites in operation, and the company plans to add several thousand more in the years ahead (meaning it could be a serious rival to SpaceX).

Amazon Leo isn’t officially scheduled to launch until later this year, however, it has already signed some major customers. For example, US airline giant Delta Airlines is going to use the service to power its onboard wifi.

One other thing worth mentioning is that Jassy explained why Amazon is investing so much money in AI infrastructure ($200bn this year). Ultimately, the company sees AI as a major opportunity and it expects to monetise this capex within a few years.

Growth may not be in a straight line

After this letter, I think investors are starting to see the long-term potential here. This is no longer just a play on online shopping and cloud computing – it’s a tech powerhouse that could potentially dominate a broad range of industries including e-commerce, AI, semiconductors, space, digital advertising, and digital healthcare.

Of course, growth may not be linear (ie, a straight line). Jassy touched on this in the annual letter, stating that Amazon’s cloud business, AWS, has faced obstacles over the years and has had to move in different directions than originally anticipated at times.

This brings me to Amazon’s Q1 earnings. These will be posted on Wednesday (29 April) after the US market closes.

They may not be perfect. There’s a chance that the stock could fall if investors hear something they don’t like.

A stock to consider buying

If the stock does fall, I think investors should consider taking advantage of the weakness. I think it’s worth a look even if it doesn’t fall.

Because in the long run, I think this Mag 7 name is going considerably higher. Note that at present, the forward-looking price-to-earnings (P/E) ratio using the earnings forecast for 2027 is only around 27, so the stock isn’t particularly expensive today.