Amazon’s Stock Appeal Hit by Intensifying Cloud Competition

Core Insights - Amazon's cloud-computing business, Amazon Web Services (AWS), has been a significant driver of its stock performance for nearly two decades, but increasing competition from Microsoft and Oracle is diminishing its attractiveness [1] - The rise of artificial intelligence has spurred demand for cloud hyperscalers, with AWS holding the largest market share, followed by Microsoft Azure and Google Cloud Platform, while Oracle shows substantial growth [2] Market Valuation - Amazon's stock is currently valued at approximately 25 times expected earnings over the next 12 months, which is a notable discount compared to the Nasdaq 100 Index's 27 times, marking one of the largest valuation gaps on record [3] - In contrast, Oracle is trading at 40 times estimated earnings, close to its highest P/E ratio since the dot-com era, while Microsoft is at nearly 32 times, above its 10-year average [3] Competitive Landscape - Alphabet's shares are trading at 22 times forward earnings, which is a slight premium to its long-term average, indicating a narrowing gap with Amazon [4] - AWS accounted for over half of Amazon's operating profit in Q2, but its cloud revenue growth has lagged behind that of Microsoft and Alphabet, leading to a weaker-than-expected forecast for operating income [5] Industry Dynamics - The competition in the cloud services market is intensifying, with AWS showing signs of falling behind in securing AI workflows compared to Azure, Oracle, and CoreWeave [6] - Despite the overall growth potential in the cloud market, Amazon may struggle to keep pace with its competitors, as indicated by a lack of acceleration in its backlog related to AI [7]