In his annual letter to shareholders, Amazon (AMZN) CEO Jeff Bezos has been known to pen insightful reflections on where the tech giant might be going next, giving a rare peek into what the company's top brass is thinking about as the Amazon empire continues to expand.
Bezos' latest memo, made public on Wednesday morning, lays out some of the core principles that fuel his "Day One" philosophy -- that despite Amazon's 23-year history, its journey has just begun. Becoming a "Day Two" company, meanwhile, is synonymous with an "excruciating, painful decline, followed by death." The key to remaining a Day One company, Bezos wrote, lies in being nimble, forward-thinking and not letting the process of running a company "own us."
Another big part of being a Day One company, according to Bezos, embracing the latest trends, rather than opting to wait and see, only to be left behind. At the top of Bezos' list is artificial intelligence, a trend that Bezos notes has fueled the growth of several major services at Amazon, including autonomous Prime Air delivery drones, the Amazon Go convenience store and Amazon's Alexa voice assistant.
"But much of what we do with machine learning happens beneath the surface," Bezos explained. "Machine learning drives our algorithms for demand forecasting, product search ranking, product and deals recommendations, merchandising replacements, fraud detection, translations and much more."
Amazon's deep learning algorithms are being used to simplify a wide-ranging set of complex issues, like early disease detection and increasing crop yields, as well as natural language understanding and speech analysis, Bezos noted.
"Watch this space. Much more to come," he added.
It makes sense that Bezos is declaring artificial intelligence and machine learning as two of the most exciting and potentially profit-boosting technologies being developed today. The artificial intelligence market, often lumped in with machine learning, is estimated to be worth as much as $47 billion in 2020, up from about $8 billion in 2016, according to IDC.
Several of Silicon Valley's biggest players have big expectations for what the artificial intelligence market's value may be in the coming years. Sundar Pichai, CEO of Alphabet's (GOOGL) Google, said on the company's most recent earnings call that advancements in machine learning and artificial intelligence, such as natural language processing, voice recognition and computer vision, will pioneer the next wave of innovation in consumer internet, according to Barclays.
Andrew Ng, the former chief scientist at Baidu (BIDU) , likened AI to the advent of electricity.
"Just as electricity transformed almost everything 100 years ago, today I actually have a hard time thinking of an industry that I don't think AI will transform in the next several years," Ng said in a recent speech at Stanford University.
In a sweeping report on the artificial intelligence market, CB Insights noted that there have been more than 200 acquisitions of AI startups by companies such as Google, Facebook and Apple (AAPL) since 2012. AI has even become a hot commodity among some more surprising players like Ford (F) and General Electric (GE) .
Though AI is still in its early stages, CB Insights tech analyst Nicholas Pappageorge said it's going to be a "very valuable thing." Its breakthrough cloud computing platform Amazon Web Services (AWS), for example, has some deep learning features such as Lex, Polly and Rekognition that businesses can use for themselves and offer to their customers. AWS is expected to bring in $16 billion in revenue by 2017, according to Deutsche Bank, and is estimated to be six times larger than its closest rival, Microsoft's Azure.
"Historically, Amazon has done a good job making essential internet software and services and selling them to the world," Pappageorge noted. "...And selling computing power, which runs the present and future of all things digital, allows Amazon to be the backbone for a lot of the innovation. Not coincidentally, AWS is already offering AI/deep learning/machine learning as a service."
Soon, AI will be applied to more areas "than we can fathom," he added, and Amazon's new role as the go-to place for big data and the cloud will make it well-positioned to focus on AI.
Amazon has just begun applying AI to its interactions with customers through its voice-activated Echo devices, of which Bezos noted in his letter to shareholders keeps running out of stock, "despite our best efforts."
"When it comes to using AI and machine for interaction with customers [Amazon is] only getting started," said Tim Bajarin, president of tech research firm Creative Strategies, adding that he predicts Amazon will further integrate AI into its Amazon Video products, delivery systems and mobile services in the coming years.
And when looking at what's fueling Amazon's explosive, double-digit growth year-over-year, AI is likely to be one of the driving forces that could help propel it to being one of the first companies with a trillion dollar market cap. It goes to show that Bezos has some sound advice for shareholders about the importance of being the first to adopt new trends.
"Amazon has fully embraced the importance of AI and machine learning but they will integrate it much more deeply into their products and services over time," Bajarin explained. "AI and machine learning will continue to be Amazon's secret weapon when it comes to their growth."