Core Insights - Morgan Stanley is optimistic about Amazon's expansion of robotics, predicting annual savings of $2-$4 billion as the company plans to establish around 40 next-generation robotics warehouses by 2027 [1][2] Group 1: Robotics and AI Efficiencies - Amazon has deployed over 1 million robots in its operations and introduced DeepFleet, a generative AI model designed for logistics, which is expected to enhance robot collaboration and reduce transit times by 10% while lowering overall costs [2] - The company aims to automate 600,000 positions while targeting to double merchandise volume by 2033, indicating a significant reliance on robotic systems and AI tools for these transitions [3] Group 2: Zoox and Autonomous Vehicles - Zoox, Amazon's autonomous ride-share initiative, is pioneering a driverless operation with a unique design that lacks a steering wheel or pedals, featuring an interior where passengers face each other [4] - While Zoox may compete with major players like Waymo and Tesla in the ride-hailing market, Amazon is strategically positioned to utilize this technology for last-mile deliveries, enhancing its supply chain capabilities [5]

Core Insights - The acquisition of Whole Foods by Amazon for $13.7 billion in 2017 was influenced by pressure from activist investors, specifically Jana Partners, who threatened to take control of the board and sell the company [1][2][4]. Group 1: Activist Investor Pressure - John Mackey, cofounder and former CEO of Whole Foods, revealed that he was pressured by Jana Partners, which had acquired an 8.8% stake in the company, to explore a sale [2][5]. - Jana Partners presented a confrontational ultimatum, indicating they would take over the board, fire Mackey and his executives, and sell the company to the highest bidder [4][6]. Group 2: Whole Foods' Operational Challenges - Whole Foods faced declining same-store sales for six consecutive quarters and was struggling with competition from conventional grocers offering organic products [6]. - The company's reputation for high prices, often referred to as "Whole Paycheck," contributed to its vulnerability to activist pressure, leading to a significant drop in stock price prior to Jana's involvement [6]. Group 3: Strategic Considerations - In response to the activist investors, Whole Foods' leadership considered various options, including a proxy battle, but recognized the need for time to improve operations and lower prices, which was not feasible under the pressure from hostile shareholders [7].

Core Insights - Amazon stock (NASDAQ: AMZN) has a history of delivering impressive returns, achieving over 30% gains in less than two months on 13 occasions, particularly in 2010 and 2020, indicating potential for future growth [1] Group 1: Growth Drivers - Amazon Web Services (AWS) is a major growth engine, with Q2'25 sales reaching $30.9 billion, a 17.5% year-over-year increase, and potential for operating income boost tied to AI-driven demand [4] - The advertising segment is expanding rapidly, with Q2'25 advertisement revenue at $15.7 billion, marking a 22% year-over-year increase, contributing significantly to overall profitability [4] - International operations have shown a remarkable turnaround, with Q2'25 International Operating Income at $1.5 billion, a 448% increase, expected to enhance overall profitability [4] Group 2: Financial Performance - The High Quality Portfolio has outperformed its benchmark, achieving returns exceeding 105% since inception, indicating a less volatile investment option compared to individual stocks like AMZN [2] - Financial fundamentals are solid, with key metrics indicating strong performance relative to the S&P median [3] Group 3: Historical Performance and Risks - Amazon has experienced significant declines during market downturns, including a nearly 94% drop during the Dot-Com Bubble and a 65% decline during the Global Financial Crisis, highlighting potential risks [5] - Stocks can decline even in favorable market conditions due to earnings announcements and business updates, necessitating comprehensive analysis before investing [6]

Core Insights - The article emphasizes the importance of Remaining Performance Obligations (RPO) as a forward-looking indicator for assessing the future revenue, growth quality, and potential risks of tech giants, especially in the context of the current AI investment boom [2][3][5]. RPO Overview - RPO represents the portion of legally binding and irrevocable contracts that a company has signed, which are yet to be fulfilled and recognized as revenue. It excludes optional renewals or contracts with no significant penalties for termination [5]. - A growing RPO balance typically indicates strong new orders and stable customer relationships, while a declining RPO may signal slowing sales momentum or shorter contract durations [5]. RPO Growth Among Key Companies - Several key companies in the AI ecosystem have experienced explosive growth in RPO balances over the past six quarters: - Microsoft’s RPO increased by 55% [6]. - Coreweave’s RPO surged by 218% [7]. - Oracle’s RPO astonishingly grew by 411%, with the company disclosing approximately $65 billion in incremental RPO from just four customers [8]. RPO Quality and Contract Duration - The quality of RPO varies significantly among companies, particularly regarding contract duration. Oracle and Coreweave's substantial RPO is primarily derived from long-term contracts, while Microsoft, Amazon, and Google have shorter agreement terms [10]. - The ratio of RPO to the past 12 months' revenue reveals that Coreweave and Oracle have ratios of 14.4x and 8.5x, respectively, while Microsoft’s ratio is only 1.3x, and Amazon and Google are around 0.3x [10][13]. Valuation Implications - Comparing RPO to company market capitalization provides insights into valuation impacts. Coreweave and Oracle have RPO accounting for 81% and 60% of their market values, respectively, while Microsoft’s ratio is only 9% [15]. - This disparity indicates that investors attribute a significant portion of Coreweave and Oracle's value to their contracted future revenues, whereas Microsoft, Amazon, and Google’s valuations reflect broader growth opportunities beyond signed contracts [15]. Risks and Uncertainties - Companies like Coreweave and Oracle face execution risks related to the costs of fulfilling large-scale contracts, which can affect the ultimate return rates of these contracts [16]. - There is also a customer concentration risk due to the interconnected relationships within the AI ecosystem, creating a "chain" of dependencies among participants [17]. Nvidia's Unique Model - In contrast to the aforementioned companies, Nvidia has maintained a relatively low RPO balance of around $1.8 billion, reflecting its unique "optional procurement" business model, which does not involve long-term commitments [20]. - This model provides Nvidia with flexibility but also means that its future revenue visibility cannot be captured through RPO metrics [22].

20 October 2025 AMZN 250.00 USD Amazon.Com Inc Rating Outperform Price Target U.S. Internet Mark Shmulik +1 917 344 8508 mark.shmulik@bernsteinsg.com Wenhuan Chang +1 917 344 8546 wenhuan.chang@bernsteinsg.com Lavnik Balyan +1 917 344 8563 lavnik.balyan@bernsteinsg.com Amazon: Is AWS in last place in AI? [Part I] Growing pies and shrinking slices. If there's a singular framework to tackle tech debates, this is it. Facebook and TikTok, Google and ChatGPT, Uber and Robotaxis, and now AWS and AI/ neo-clouds. I ...

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