Giant online retailer Amazon.com Inc.’s (AMZN) under-construction data center in Virginia caught fire on Jan 9. The fire initially broke out on the roof. There were no casualties as workers managed to escape safely. The local fire department was able to put out the fire in an hour.
Based in Loudoun County, VA, a suburb outside Washington, the data center was in the early stages of construction. It was being built by a third party and was intended for Amazon’s cloud computing business, Amazon Web Services. Amazon says that its data center is not a production facility and therefore the fire caused no harm to operations.
However, the fire did impact Amazon shares as they were down 1.2%.
This Zacks Rank #3 (Hold) technology stock has plunged 25.33% in the last52 weeks underscoring shareholders' concern about the huge investments taking a toll on the company’s bottom line.
Nevertheless, investors still believe in Amazon’s prospects, especially its cloud computing business. The company is expanding AWS internationally and investing in technology infrastructure to support rapid growth.
The need for data center expansion is rising due to the growing demand for cloud computing and the ever-increasing needs of Internet users. Market research firm, IDC predicts that the cloud market will reach more than $127 billion in 2018. Amazon with its solid portfolio should be able to tap this opportunity.
As a part of its efforts to expand AWS, Amazon recently announced that AWS would be available from data centers in Western China. Amazon has even entered into definitive agreements with Beijing and Ningxia governments in this regard. Amazon’s entry will pose tough competition for Alibaba (BABA), which is considered to be the e-commerce giant in China.
Better-ranked stocks in this industry include Geeknet, Inc. (GKNT) and Mercadolibre, Inc. (MELI). Both these stocks sport a Zacks Rank #1 (Strong Buy).
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