Amazon surpasses 3 trillion dollars: has Wall Street just answered AI sceptics?

For almost two years, the same question has persistently resurfaced in the financial markets. American multinationals are spending billions of dollars to develop artificial intelligence, but when will these investments actually generate profits?

The results published by Amazon last week may offer an initial answer. Wall Street has been quick to respond.

On Monday, the American leader surpassed the symbolic 3 trillion dollar market capitalisation threshold for the first time. It now joins the exclusive circle of the world's five most valuable companies, behind Nvidia, Apple, Microsoft and Alphabet. Since the publication of its quarterly results on Thursday, its stock has soared by more than 20 percent, adding nearly 500 billion dollars in market capitalisation, according to AFP.

This surge reflects a shift in investor perception regarding the ability of technology companies to turn their investments in artificial intelligence into profitable growth.

True driver is AWS

At first glance, Amazon's results appear solid. However, one figure in particular has captured the market's attention.

In the second quarter, Amazon Web Services (AWS), the group's cloud division, posted 37 percent year-over-year growth, compared to 28 percent in the previous quarter. This represents its fastest pace of growth in nearly five years, according to figures released by the group.

AWS is no longer just a web hosting business. Today, it is the primary infrastructure where companies develop, train and deploy their artificial intelligence models. In other words, investments made over several years are now directly fuelling the group's growth.

What really reassures Wall Street

Investors have never disputed the relevance of artificial intelligence. The real issue was its cost.

For two years, Amazon, Microsoft, Alphabet and Meta have announced record investment programmes quarter after quarter. These are aimed at building new data centres, purchasing thousands of Nvidia processors and developing their own infrastructures.

These expenses, which now amount to tens of billions of dollars per year, fuelled a recurring concern: would profits be permanently sacrificed for a technology whose revenues were still difficult to measure?

Amazon provides the first demonstration to the contrary. Despite accelerating its AI investments, the group has managed to preserve its margins while also accelerating the growth of its cloud business.

This is precisely the combination the markets were waiting for. As Giovanni Mazzariello, a portfolio manager at UniCredit, summarises, the latest results from major US tech companies “have proved to be generally reassuring”. According to AFP, he stated that Alphabet, Microsoft and Amazon have not only confirmed their AI investment plans; they also continue to show sustained growth in their cloud businesses, improving profitability and an expanding order book.

Answer to doubts, but not a blank cheque

These results come as several observers have for months been raising the risk of an “AI bubble”.

The expression, however, deserves comment. Unlike the dot-com bubble of the 2000s, the companies at the heart of this revolution today are not solely based on promises of future growth.

Amazon remains, first and foremost, the global leader in e-commerce and one of the world's leading cloud providers. Microsoft still derives the bulk of its profits from Windows, Office or Azure. Alphabet continues to generate tens of billions of dollars from its advertising business. As for Meta, its revenue still comes mainly from Facebook, Instagram and WhatsApp.

In other words, the investments in AI are, for the most part, an extension of already extremely profitable business models. The markets are obviously not penalising AI itself. They are penalising, as is often the case, the lack of return on investment when it is slow to materialise.

This also explains the more mixed reaction seen with Meta. Despite solid results, Mark Zuckerberg's group was penalised by Wall Street, with investors judging that the increase in AI-related spending was weighing more heavily on its immediate profitability, AFP recalls.

New reading of tech valuations

Beyond the Amazon case, these results could mark a broader turning point. For several quarters, investors have been demanding proof that spending on artificial intelligence was producing more than just a promise.

The latest publications are beginning to provide this proof. The cloud is accelerating. Order books are filling up. Margins are holding up. The groups continue to invest.

Wall Street seems to be saying that it is no longer the amounts invested that are of concern, but rather the ability of companies to demonstrate that these investments create actual value. Amazon has just shown that it is possible to finance a global race in artificial intelligence without sacrificing profitability.

For the markets, which feared the financial black hole of AI, this is undoubtedly the most convincing demonstration of this earnings season.