Amazon Shares Crash This Year
We are less than two months into the year, and Amazon’s (NASDAQ: AMZN | AMZN Price Prediction) stock is in the midst of a collapse. It is already down 10%, while the S&P 500 is up 1%. To make matters…
We are less than two months into the year, and Amazon’s (NASDAQ: AMZN | AMZN Price Prediction) stock is in the midst of a collapse. It is already down 10%, while the S&P 500 is up 1%. To make matters worse for its investors, the drop is long-lived. Amazon’s stock is up 34% in the last five years, while the S&P is up 81%. Even Apple (NASDAQ: AAPL), which has been out of favor with many investors, is up 124% over the same period.
What happened? Amazon has other things; most of the company’s revenue comes from an old-world business. Started as a primitive online book seller in 1994, it remains largely an e-commerce company with mediocre e-commerce earnings. Last year, 81% of its $717 billion came from e-commerce. The operating income from e-commerce was 43% of the total,
AWS, the more successful unit, was 19% of revenue and 57% of operating income. But AWS has fierce competition. Amazon’s market share in cloud computing has been dropping. In the fourth quarter of last year, it was 29%. Microsoft’s (NASDAQ: MSFT) share moved up to 20%. As these and Google jockey for position, there are concerns that aggressive pricing has become part of the market-share war.
Amazon’s AI play does not appear to put it at the head of the pack. OpenAI and Google hold those positions now. In the enterprise segment of the AI industry, OpenAI is the leader. To position itself in the AI sector, the company said it would spend $200 billion this year. It is a massive investment in a business which is still in its infancy, no matter how critical it will be to tech in the future. Despite the size of its investment, the entire sectorwill spend $700 billion om data centers this year.
If there is anxiety about AI beyond the jobs it may take, it is the fear of overbuilding AI data centers.
Amazon’s core business is old. Its investment in the unproven future is colossal
Contact [email protected] for any questions or corrections.
Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
