I keep hitting the buy button on Amazon (NASDAQ:AMZN | AMZN Price Prediction), and my brokerage statement shows exactly how many times. The reason is simple. I think the market still misreads what this company has quietly become. Amazon has turned into a vertically integrated silicon company that happens to own the world’s most valuable enterprise sales channel, and every quarter through late 2026 keeps proving the case.
The core thesis pulls me back every time. Amazon’s custom silicon lines (Trainium and Graviton) have crossed an annualized revenue run rate above $20 billion with triple-digit year-over-year growth. Management said plainly that this “custom silicon business is now one of the top three data center chip businesses in the world”. That business is sitting inside a retailer’s ticker, and I am accumulating it before Wall Street reprices it.
The Data That Keeps Refilling My Position
Three data points do the heavy lifting. First, AWS grew 28% year over year in Q1 2026 to $37.59 billion, its fastest pace in 15 quarters, at a $150 billion annualized run rate and a 37.7% operating margin. Growth on that base is rare.
Second, the backlog. Q1 AWS backlog stood at $364 billion, and that figure excludes the $100 billion-plus Anthropic deal. Trainium commitments alone total over $225 billion. This is contracted future revenue from OpenAI, Anthropic, Meta, and Uber.
Third, the margin story. Company-wide operating margin hit 13.1%, the highest ever, on operating income of $23.85 billion. EPS came in at $2.78 versus a $1.73 estimate, the fifth consecutive beat. Trainium2 delivers roughly 30% better price performance than comparable GPUs, and management expects the chip program to save tens of billions of dollars of CapEx each year plus “several hundred basis points of operating margin advantage” at scale.
Why Not the Obvious Alternative
The reflexive AI trade is NVIDIA (NASDAQ:NVDA). I still respect the picks-and-shovels case. I just prefer the customer quietly closing the price gap on its supplier. Trainium2 is largely sold out, Trainium3 is nearly fully subscribed, and almost 80% of Bedrock workloads run on Trainium. Every wafer AWS ships at a 30% better price performance point transfers gross margin from Nvidia’s income statement to Amazon’s. That value reshoring is what I am buying.
The Risk I Am Not Waving Off
The concern I take seriously is capital intensity. Amazon plans roughly $200 billion of CapEx in 2026. TTM free cash flow fell 95% to $1.2 billion. Long-term debt climbed to $119.1 billion from $65.6 billion. Management already has customer commitments for a substantial portion of that capacity, data centers carry 30-plus year useful lives, and Andy Jassy has been direct: “We have been through this cycle with the first big AWS growth wave, and we like the results.” I lived through that first cycle as a shareholder. I like how it ended.
What Keeps the Buy Button Active
At a P/E near 30 with quarterly earnings growth of 74.8% year over year, 62 buy ratings, zero sell ratings, and an analyst target of $314.27, one ticker gets me a hyperscaler, a top-three chip company, a $70 billion-plus ad business growing 24%, and the second-largest grocer in the U.S. I keep buying because five straight EPS beats, a $364 billion backlog, and $20 billion in captive silicon revenue are receipts, and receipts are what my retirement account runs on.
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