Could Investing $1,000 in Amazon Make You Richer?

Core Viewpoint - Amazon's recent stock performance has been underwhelming, with a 8.2% decline over the past year, contrasting with the S&P 500's 16.5% gain, raising questions about its long-term investment potential [2] Group 1: Business Segments and Performance - Amazon operates through three segments: North America, international, and Amazon Web Services (AWS), with the first two contributing 82% of total sales, amounting to $716.9 billion in 2025 [4] - AWS remains the largest profit generator for Amazon, achieving a 14.5% increase in operating income to $45.6 billion [5] - The North America and international segments generated $34.7 billion in operating income, representing 43% of the total [4] Group 2: Competitive Advantage and Market Position - AWS holds a leading market share of 30% as of mid-2025, outperforming Microsoft's Azure at 20% and Alphabet's Google Cloud at 13%, benefiting from the growing demand for data and resources for data centers [8] - The emergence of generative artificial intelligence (AI) is expected to further accelerate AWS's growth [8] Group 3: Financial Outlook and Valuation - Following the fourth-quarter earnings release, Amazon's stock price declined due to management's announcement of a significant increase in capital expenditures to $200 billion for the year, up from $131.8 billion in 2025 [9] - Despite the increased spending, management anticipates a substantial return on capital, which is expected to benefit shareholders [10] - Amazon's current price-to-earnings (P/E) ratio is 28, down from 40 a year ago, making its valuation more attractive compared to the S&P 500's P/E ratio of 30 [11] Group 4: Investment Considerations - The question remains whether investing in Amazon will yield better returns than an index fund replicating the S&P 500, with the potential for greater gains based on Amazon's valuation and growth prospects [12]