Amazon Is Going To $10 Trillion
Four AI businesses are stacked inside one ticker. The market still prices it like a retailer.
Amazon needs about $400 billion in annual operating income to justify a $10 trillion market cap at a 25 times multiple. It currently produces $93.7 billion on a trailing basis, growing 23%. Compound that growth rate for seven years and you land at $399 billion.
I think this is very achievable and it’s why I plan to double my AMZN position. For reference, here is my current AMZN 0.00%↑ position:
Getting there means the stock roughly triples from here, which works out to about an 18% annualized return per year, for seven years. For a company this size that sounds absurd until you look at what’s actually inside it. That’s why I wanted to provide an in-depth analysis on why I think AMZN will be worth $10T.
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Whoever Owns The Distribution Wins
The AI models themselves are commoditizing fast and now it’s at the point where everyone can build one. I built one for Founding members and I use it all of the time to digest earnings data. Therefore, I think we’ll see AI lose some value from the perspective of a software tool. AI will likely disrupt a ton of industries but what it cannot disrupt is distribution.
The models are getting commoditized but the distribution network isn’t.
So as agentic shopping becomes normal, and it will, the AI does the choosing and somebody else does the fulfilling. Every one of those transactions has to land on physical infrastructure that took decades and hundreds of billions to build. Amazon owns the best version of that infrastructure in the world and it cannot be easily replicated by peers. AMZN has been improving this process for decades now.
Earlier this year they got a court injunction blocking an outside AI shopping agent from placing orders on their platform, arguing it accessed customer accounts without authorization. Whatever you think of the legal merits, the message is obvious.
Amazon intends to own the agent layer sitting on top of its own distribution, not rent it out to whoever builds the best chatbot.
That’s why I keep coming back to the idea that Amazon has more AI leverage than the market gives it credit for. Most AI companies have one exposure. Amazon has the:
Compute
The chips
The ad engine
The fulfillment network
A large stake in one of the leading model labs that also happens to be a giant AWS customer.
With this in mind, I expect AMZN’s net sales to continue expanding over the next decade at a rapid pace.
You’re Buying Four AI Companies With Amazon
Most people look at Amazon and see a retailer with a cloud business bolted on. That framing is about five years out of date. What you’re actually buying is four distinct AI businesses that feed each other, and any one of them would be a significant public company on its own.
The first is AWS, which is the compute layer. It sells training and inference capacity to everyone else building AI, and it just did $42.2 billion in a quarter at a 39.4% operating margin. That margin expanded 650 basis points in a year, and the segment is now running at a $169 billion annualized rate.
