What Happened?
Shares of cloud computing and online retail behemoth Amazon (NASDAQ: AMZN) jumped 4.9% in the afternoon session after the company announced a landmark $38 billion, multi-year cloud services agreement with OpenAI, the creator of ChatGPT. The seven-year strategic partnership provided OpenAI with access to Amazon Web Services (AWS) infrastructure, including hundreds of thousands of Nvidia graphics processing units to run and scale its artificial intelligence workloads. This marked OpenAI's first major cloud collaboration outside of Microsoft and was seen as a significant win for Amazon's cloud division. The news came on the heels of a strong third-quarter financial report, where AWS had already shown impressive growth with sales up 20% year-over-year to $33 billion. The combination of the new, massive contract and recent strong performance fueled investor optimism, adding nearly $140 billion to Amazon's market value.
The shares closed the day at $254.07, up 4.1% from previous close.
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What Is The Market Telling Us
Amazon’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock gained 10.4% on the news that the company reported third-quarter results that surpassed Wall Street's expectations, driven by strong growth in its cloud computing division. Amazon's net sales rose 13.4% from the previous year to $180.2 billion, beating estimates, while earnings per share came in at $1.95, also well above analysts' forecasts. A key highlight was Amazon Web Services (AWS), the company's cloud unit, where sales growth accelerated to 20%, a rate not seen since 2022, reaching $33.01 billion. This strong performance from its most profitable division reassured investors. Additionally, the company's advertising business continued to show robust growth, with revenue increasing by 21.4% year-over-year. The positive results across key segments, particularly the acceleration in AWS, signaled healthy demand for the tech giant. Operating profit missed, but excluding two one-time charges, it would have beaten, and the market appeared to understand this. Overall, this print featured some key positives.
Amazon is up 15.2% since the beginning of the year, and at $253.90 per share, has set a new 52-week high. Investors who bought $1,000 worth of Amazon’s shares 5 years ago would now be looking at an investment worth $1,665.
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