Amazon (AMZN) shares were a doggy of the Mag-7 for most of 2025, falling as low as 161 in late April during the post Liberation Day temper tantrum by Mr. Market and trading in a narrow 200-225 range since late summer on concerns that AWS was losing ground to Microsoft's Azure and Google Cloud in the cloud computing league tables. Even now, at 244 it is up only 11% for 2025, 4 points lower than the S&P 500 index. Yuckyville.

Yet Q3 earnings showed that AWS delivered the fastest growth since 2022 and thus the golden goose is still laying its magic eggs at a 20% annual growth rate and the $38 billion cloud deal with OpenAI has done a Rip Van Winkle on the shares.

AMZN now trades at 32X forward earnings, a val discount to Walmart at 35X and Costco's nosebleed 42X even though its revenue growth is a stellar 12% against Walmart's pathetic 4% and Costco's so-so 8%. Contrary to popular belief, the e-commerce revolution is still in its early stages with only 20% of US retail sales in e-commerce but 50% of all incremental sales will be executed via digital pipelines.

The OpenAI deal definitely means that the AWS infrastructure franchise was not the Cinderella in the AI Age as this epic deal will use state of the art Nvidia GPU accelerator chip in its network. Prime is a magnet for high margin e-commerce revenue that will enable Amazon to increase its global e-commerce market share, despite its existing astronomical scale.

AWS has been the colossus of the public cloud universe and advertising is its third but growing revenue growth pillar. I expect revenues to accelerate to 13-14% and margin expansion provide a steroid shot for EPS growth in the next two years. That should make AMZN anything but the sleeping doggy it was for most of 2025 until the AWS OpenAI deal.

The Chicago Board Options Exchange now offers me a multitude of strategies where I can design/execute AMZN strategies with an asymmetric risk/return payoff calibrated to my precise views on the name and skewed disproportionately to make the cash register ring.

I also see enormous growth potential in Amazon's $14 billion acquisition of Whole Foods in 2017 and MGM in 2022 as both these domains are wide open for e-commerce and ad platforms. In both e-commerce and cloud computing, Amazon has been the dominant disrupter du jour and boasts a digital virtuous cycle in its myriad e-commerce marketplaces.

In Q3 AMZN reported ad revenue growth of 24% YoY to $17.7 billion. This reinforces my margin expansion argument since ad margins are far higher than those possible in e-commerce. The 3-point positive delta in the AWS growth rate from Q2 to Q3 proves that AWS is a classic beneficiary of the AI revolution and its valuation metrics will rise to reflect this reality.

Meta trades at 630 in the pre-market after giving us another superb buy opportunity on Friday night at 607. The healing process is never linear but it has very definitely begun though I would not expect a one-way ticket to the moon as the 1990's syrupy pop hit went. Zuck once snookered the market with his metaverse fantasies and investors, once bitten twice shy have slammed his shares by a painful 24% after Q3 earnings. Sophocles warned us on an existential trust about human life. After hubris, there can only be nemesis.

Also published on Medium.

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