Amazon ‘s embrace of artificial intelligence has the potential to transform the notoriously tough grocery business into a fountain of profits. Grocery has long been seen as a low-margin business, so for a company like Amazon, it offered an avenue for sales growth but limited earnings appeal. Indeed, Amazon’s success selling everyday essentials has, in the recent past, been a double-edged sword with the way it’s squeezed profits. And yet, it’s a hard market to ignore. Shoppers in the U.S. are increasingly turning to the internet to order fresh food and other everyday essentials, making consumer packaged goods one of the fastest growing categories of online shopping, JPMorgan said in a note to clients Monday. While consumer packaged goods including groceries represented around 43% of U.S. adjusted retail sales last year, only about 15% of them took place online — a gap that JPMorgan called Amazon’s “largest growth opportunity.” That’s where Amazon’s aggressive investments into AI come into play, giving the Club reason for optimism. As Amazon moves further into the online grocery and essentials business, the company should be able to harness AI to make delivering eggs, strawberries and paper towels more profitable than would’ve been possible before. The cherry on top for investors: Shoppers will have more reason to stay subscribed to Prime. Amazon commands a 23% share of U.S. online grocery sales, which is second to Walmart’s 29% but ahead of Instacart’s 16%, JPMorgan estimated in its Monday note. In 2024, Amazon delivered over 2 billion grocery and household essential items in the U.S. in the same or next day, a 50% year-over-year increase, the company said in a blog post this month . According to CEO Andy Jassy, Amazon’s everyday essentials business in the U.S. grew more than twice as fast as all other categories in the first quarter of 2025, accounting for one in three units sold in the country. “I think that the way people buy groceries is going to continue to evolve over time. So I continue to be very bullish on our grocery business. It’s large today and has a chance to be much larger in the future,” Jassy said at Amazon’s annual shareholder meeting last month. Amazon’s vast selection – three million grocery and household unit offerings for Prime members, dwarfing the 30,000 items of a typical supermarket, according to JPMorgan – combined with its rapid delivery capabilities are among its competitive advantages. It’s leaning into them. On Tuesday, Amazon announced that it’s expanding same-day and next-day delivery to tens of millions of U.S. customers in over 4,000 smaller cities, towns and rural communities by the end of 2025. “One of the biggest benefits of this expansion is the option for customers to shop Amazon’s everyday essentials,” Amazon said in a press release . In the 1,000 similar communities where this service was already available, the company said that more than 90% of the top 50 items repurchased for same-day delivery fall within the everyday essentials category. Amazon is also experimenting with adding more perishable food items to the same-day delivery facilities that serve its traditional retail business, Jassy said at the annual meeting. “Now when you’re getting those items that you get same day, you can add perishables like eggs or milk or bread or yogurt, and that experience is really resonating with customers,” the CEO said. “We’re seeing very significant adoption. And I’m optimistic as we roll that out to many more of our same-day facilities that that will lead to more of our customers buying perishables from us.” The data makes it clear that Prime members – whether in urban or rural areas – like to have these kinds of items delivered to their doorsteps by Amazon. That bodes well for the company capitalizing on the large growth opportunity that JPMorgan identified. For investors, the exciting part is that Amazon’s advancements in AI have the potential to make those deliveries a lot more profitable in the future, ensuring that the ease of ordering recipe ingredients and dish soap isn’t a drag on the bottom line. The technology also can improve the overall shopping experience, leading to more dollars being spent on Amazon’s marketplace. Amazon has already integrated AI across its logistics network, deploying over 750,000 robots since 2012 to streamline fulfillment. The company is using AI for demand forecasting tools, inventory placement and improving robotics efficiency, Jassy wrote in a memo last week; he said all three use cases have speed up delivery times and cut costs. Meanwhile, on the app and website, its generative AI shopping assistant called Rufus enhances product discovery, while sellers have tools to help write product pages, among other things. There’s considerable levers to pull the future, particularly on delivery. Its self-driving car company Zoox could one day automate its delivery vehicle fleet, and media reports also indicate that it’s testing humanoid robots for package delivery, signaling further efficiency gains could be on the horizon. And at the companywide level, Jassy said in the memo last week that generative AI will reduce its corporate workforce in the coming years. In the Club’s eyes, Amazon has a technological edge over competitors like Walmart , the world’s largest retailer, making its grocery and everyday essentials push more compelling, said Zev Fima, portfolio analyst for the Club. For its part, Walmart’s vast networks of physical stores across the U.S. has been an advantage for its online grocery business. To be sure, the uncertain economy could weigh on consumer spending in the near term, impacting online purchases. JPMorgan estimates that U.S. e-commerce growth will decelerate in 2025 to 5.3% on an annual basis from last year’s 7.4% growth. Yet, Amazon has already laid a strong foundation to keep growing sales over time. Since acquiring Whole Foods in 2017, Amazon has grown its sales by over 40%. Even excluding Whole Foods and the brick-and-mortar Amazon Fresh stores, the company said it had total grocery sales north of $100 billion last year, making it one of the largest grocers in the U.S. Looking ahead, JPMorgan estimates mid-to-high single digits growth in U.S. e-commerce sales in 2026 and believes the trend of more dollars going toward online shopping is far from over. That includes within the grocery category, specifically. The analysts have a buy-equivalent outperform rating on Amazon stock, a price target of $240 a share and “best idea” designation. For investors like us, we remain excited by Amazon’s grocery efforts. Even modest margin improvements in this high-volume, weekly-order business could yield sizable profits. Moreover, a more efficient and convenient grocery service could make Prime subscriptions sticker, potentially justifying future price increases. By combining scale, high tech and automation, Amazon is turning a historically lower-margin business into a strategic grower. Like JPMorgan, we also have a $240 price target and a buy-equivalent 1 rating on Amazon stock. (Jim Cramer’s Charitable Trust is long AMZN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.