In Bear Market, AMZN Is The Prayer.
If you have come across my Sunday post (click here ! for details, Repost to share ok) - you would have known that US Consumer confidence report was due on Tue, 25 Feb 2025, followed by two more economic reports on Thursday and Friday, respectively.
The much “weaker-than-expected” report rattled US market big time !
Consumer Confidence Report.
The mood of US consumer, that props up about 70% of US GDP, has dimmed considerably in February 2025. (see below)
US Consumer Confidence Index slipped to 98.3 for February 2025, down -7.0 points and below Dow Jones’s 102.3 forecast.
This was the lowest reading since June 2024 (97.8) and the largest monthly drop since August 2021.
Consumers grew more pessimistic about the economic outlook in February as worries brewed about a slowing economy and rising inflation, thanks to the new president’s political antics.
In fact, consumer confidence has been slipping “quietly” since November 2024 peak of 112.8.
US market took a leg lower after a weak Conference Board report, coupled with the series of disappointing economic reports released last week, (eg. S&P flash US services PMI, S&P flash US manufacturing PMI and Consumer sentiments). (see below)
When 4pm came around:
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DJIA: +0.37% (+159.95 to 43,621.16).
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S&P 500: -0.47% (-28.0 to 5,955.25). Posted 31 new 52-week highs & 8 new lows.
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Nasdaq: -1.35% (-260.54 to 19,026.39). Recorded 44 new highs & 305 new lows.
Volume on US exchanges was 16.32 billion shares, compared with 15.32 billion average for the full session over the last 20 trading days. It was a very volatile session.
For the week:
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The Dow is up 193.14 points, or +0.4%.
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S&P 500 is down 57.88 points, or -1.0%.
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Nasdaq is down 497.62 points, or -2.5%.
Sectors’ Performances.
Of the 11 sectors, more than 54% are in the red. If we were to rank the sectors in descending order, it would be : (see below)
Can it be inferred that during these turbulent times, the best strategy is to invest in “Consumer staples” ?
Objectively, I think looking at the sectors’ performances over a 6 months period would present a more “accurate” perspective. (see below)
Over a 6 months period that spanned US presidential (a) election and (b) inauguration, the 3-best performing sectors are:
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$Consumer Discretionary Select Sector SPDR Fund(XLY)$ with +16.10% gain.
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$Communication Services Select Sector SPDR Fund(XLC)$ with +15.95% gain.
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$Financial Select Sector SPDR Fund(XLF)$ with +14.34% gain.
Zooming in to Consumer discretionary sector, its Top 3 stocks (by Market Cap) would be:
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$Amazon.com(AMZN)$ - market cap $2.255 trillion.
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$Tesla Motors(TSLA)$ - market cap $973.962 billion.
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Walmart(WMT)$ - market cap 784.782 billion.
Since I have covered both Tesla and Walmart (click to read) recently, here’s my take on Amazon.
AMZN - Past 6 months.
Looking at Amzon’s stock price movement:
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On 26 Aug 2024, Amazon was $175.50 per share.
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On 25 Feb 2025, it closed off the day at $212.80 per share.
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Over 6 months, it has gained +21.25%.
Quarterly Earnings.
On 6 Feb 2025, Amazon reported its 2024 last quarter earnings that did not disappoint.
According to LSEG,
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Earnings per share (EPS): was $1.86 vs $1.49 expected.
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Revenue: came in at $187.79 billion vs $187.30 billion expected.
In addition, Wall Street was also looking at the following revenue streams:
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Amazon Web Services: $28.8 billion vs $28.8 billion. It met Wall Street estimates, while Microsoft Azure and Google Cloud missed out.
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Advertising: $17.3 billion vs. $17.4 billion missing out estimates by a sliver. Comparatively speaking its advertising revenue still tops Google’s ($10.47 billion).
Chip Self Sufficiency
To help keep operation costs under control, Amazon has developed its own chip to reduce dependence on Nvidia’s.
Trainium and Inferentia Chips:
Amazon has developed two types of AI chips: Trainium for training large language models, and Inferentia for inference tasks.
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Trainium2, the next generation of Amazon's AI training chip, is expected to be announced for widespread availability soon.
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The chips are designed to reduce Amazon's reliance and optimize performance for AWS cloud services.
Future Developments:
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Amazon is reportedly working on Trainium3, its next-generation AI training chip, expected to debut by 2025 and potentially built using TSMC's 3nm process.
Artificial Intelligence Persue.
As a platform and service provider, Amazon
(1) AWS AI Services: (see above)
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Amazon offers (a) AI and (b) machine learning services through AWS, with over 100,000 enterprise customers using these services.
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The company is focusing on all 3 layers of the "generative AI stack": (i) infrastructure, (ii) AI models, and (iii) AI applications.
(2) Financial Impact:
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AWS reported an operating income of $10.4 billion for Q3 2024, a 50% YoY increase, driven largely by AI investments.
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Amazon's CEO, Andy Jassy, stated that the majority of their increased spending is driven by generative AI.
Quantum Computing Persue.
Amazon is also making significant investments in quantum computing:
(1) Amazon Braket:
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A managed quantum computing service that allows users to explore quantum algorithms using various hardware platforms and simulators.
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It provides access to different quantum technologies, including superconducting qubits, trapped ions, and neutral atoms.
(2) AWS Center for Quantum Computing:
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This initiative focuses on advancing quantum computing capabilities and fostering innovation in the field.
Since Stock Split.
On 03 Jun 2022, Amazon had undergone a 20-for-1 forward stock split. (see below)
Upon split completion, each “new” Amazon stock closed at $122.35.
Since then, the company's share price has experienced significant growth.
As of 25 Feb 2025, Amazon's stock price stands at $212.80, that is approx. a +74% gain, over 2 years, 8 months and 23 days. Amazing, isn’t it !
With Amazon literally at the forefront of IT frontiers, no wonder this is a keeper, right !
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Do you think - Amazon is a keeper ?
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Do you think other 2 Consumer Discretionary stocks - Tesla & Walmart are keepers too ?
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