Ca$htag$: AMZN Cloud Growth Lags Behind MSFT, "Their Game to Lose"

Time now for our cash tag segment. For that, let's bring in our next guest and that is Andy Swan, co-founder of Likefolio with the latest intimate data on Amazon. Uh Amazon is more than just an e-commerce uh company now. Uh a lot focuses on AWS. You've got new data which uh drills into that alongside what the competitive landscape looks like. So why don't you walk us through your latest sentiment data, Andy? >> Yeah, the competitive landscape for Amazon, it's getting tougher, you know. On the AWS side, especially the cloud computing side, there's only so much that Amazon can supply. It's pretty near its supply constraints right now. And so, a lot of developers are moving to the Microsoft platform. We've seen a really strong uptick in developer uptake of using uh Microsoft's cloud platforms versus Amazon's and Google. And again, I think that's more of a supply factor than a demand factor at this point. uh Microsoft simply has more compute available for companies and for developers to use. But you know overall Amazon is the leader in the space uh on both sides e-commerce and uh cloud computing. We expect it to stay that way. This has been one of the best companies in the world for a very very long time and one of those companies where pretty much buying the dip at any point in the last 25 years has been a good move. And we think uh with the stock down 13% here from its highs, pretty good opportunity. Um you know, we think that a lot of these stocks got a little bit ahead of themselves with the AI buildout race and that sort of thing. So, we're kind of correcting back to the mean here. We think Amazon's pretty fairly priced short-term, but long-term, one of the best companies in the world and one that uh if you'd have bought a 13% dip every time it came off of all-time highs, you you would be sitting in pretty good spot over the last couple decades. And we think that's uh true moving out into the future as well. It's one of those um rare companies that gives you both uh exposure to the upside in consumer demand which we see remaining strong and upside in the AI arms race which we also see remaining strong despite the recent headlines. >> Yeah, Andy. Uh looking at that consumer demand growth AWS versus peers, I mean if you look at some of the growth rates, you know, Google Alphabet had 82% growth rate year-over-year for their cloud. I understand they're third, right? Uh but you know Microsoft outperformed to the upside above 40% growth. Uh AWS was about 39% which was above the the whisper of about 35%. But this is demand growth moving forward. It's going to be more difficult for some of these these cloud companies uh moving forward to have those same type of growth rates just based on the fact that maybe they don't have the capacity as you mentioned or uh it's going to be uh you know more of a battle more of a competitive battle as these partnerships get signed uh across the board. >> Yeah, I think the battle is on. I think it's great news for developers, for companies that are embracing AI that um there's there's strong competition in the cloud computing space. Uh there's a lot of buildout happening that you know should ease some of the supply constraints and and give the customers a little better pricing. We'll see how well uh AWS's profit margins can maintain into this competitive landscape. But on the demand side, you know, we see this continuing to grow. Um, you know, a flat line for AWS consumer demand does not mean a flat line for revenue. Their existing customer base can use more and more. They can use pretty much as much compute as Amazon can give them. So, a flatline when you're the leader in a growing space and your clients are spending as much as they can is actually pretty good news. And so, that's um you know, one caveat we want to put on onto this. I think Microsoft's doing a fantastic job of picking up the slack and showing uh really strong growth. But Amazon's the leader for a reason. They remain the first choice for most customers uh on the AWS side and the e-commerce side. So it's their game to lose. >> Okay. You say it's their game to lose. Um when you look in terms of uh share performance of Alphabet Google compared to Amazon, Microsoft, Alphabet Google is still outstripping Amazon um and Microsoft. Microsoft been playing catch-up recently. um what does Amazon AWS need to do to hold on to I guess its positioning and you know get some market share from these other two. >> Yeah. On the on the AWS side, they've got to maintain that 35% growth rate. I think that's kind of the line in the sand and they've got to display that they continue they can continue to do so at very high gross margins. If they can do that then the sky's is the limit. I think some of the fears about um Amazon AWS are that they're not in this competitive environment. They're not going to be able to maintain those margins or growth rate forever, which is fair uh until you start to consider how much more people are using compute because of what a AI can offer them. So, you know, I think really this is a you know, it comes down to your viewpoint on AI in general. If you think that these buildouts are going to create too much supply, i.e. AI will spending and and growth will actually slow down, then Amazon's probably a pretty tricky bet, at least in the short term. But if you think like we do that um the AI computing demand is only going to grow and is only going to accelerate from here then all three of those companies Alphabet, Microsoft and Amazon have considerable upside from here. And then one other thing I like to throw out there just because it's mind-blowing to me is that you know an Amazon stake in anthropic uh would be larger than many many S&P 500 companies in terms of m of market cap. And that's just a mind-blowing stat to me I had to pass on today that just their their bet on Anthropic is bigger than a lot of S&P 500 companies in terms of enterprise value at this point. So, they've got a lot riding on AI. Uh, we think they're well positioned. We think that the tailwind continues and accelerates. Um, but the market is a little cautious right now and we understand that as well, but just disagree. >> Hey Andy, real quick here. Uh, you know, everything gets lost now with because AWS is their biggest profit uh maker at this point. Uh, when you look across all their segments, including retail, they just announced their their u prime days in early October. Uh and then you look at advertising, you look at subscription services. I mean, they're doing well on all those uh you know, segments of their business right? >> Yeah, they are. They're the leader. They And you know, when it when it comes to Amazon, I think the default position for most investors should be to hit the buy button. Uh it's worked for multiple decades. This is a company that has executed against opportunities as well as um you know any company in the history of the world and there's no sign that that's going to stop anytime soon. So um you know we all use Amazon every day or or at least every week. I know in our household there's an Amazon package it seems like on our front door every day. We're using Amazon data centers in our business every day at a growing pace. So we like the idea of investing in companies that we enjoy being customers of and Amazon has been that for you know 20 25 years now and deserves the benefit of the doubt we think in terms of their ability to execute in the future. >> All right thank you Andy. That's Andy Swan co-founder of likefolio with the latest sentiment data on Amazon.