Is Amazon Still a Smart Investment?

Summary

Earn Your Leisure Podcast Summary

Episode: Is Amazon Still a Smart Investment?
Release Date: April 12, 2025
Hosts: Rashad Bilal and Troy Millings
Podcast: Earn Your Leisure

Earn Your Leisure delves into the financial intricacies of major corporations, blending business analysis with pop culture insights. In the episode titled "Is Amazon Still a Smart Investment?", hosts Rashad Bilal and Troy Millings facilitate a robust discussion among a panel of investors, dissecting Amazon’s current market position, investment viability, and future prospects amidst evolving economic landscapes.

Current Investment Landscape for Amazon

The conversation ignites with Investor 2 addressing the impact of tariffs on Amazon's e-commerce operations. He posits that “In times like this, right? In terms of tariffs, Amazon being E-Commerce, we know that tariffs are going to affect the actual importer, right? So the person that's bringing it in, they're acting as a third-party consumer at this point... That will bring more business to Amazon.” [00:46]. The assertion here is that increased tariffs could disadvantage smaller businesses reliant on Amazon for importing goods, potentially funneling more consumers towards Amazon's platform due to competitive pricing pressures on smaller retailers.

Contrasting views emerge as Investor 1 declares, “Amazon for me is not in my starting five.” [01:36], emphasizing his preference for other tech giants like Nvidia, Microsoft, and TSMC (Taiwan Semiconductor Manufacturing Company). This highlights a divergence in investment philosophy, with some investors questioning Amazon's top-tier position in contemporary portfolios.

Comparisons with Tech Giants

The discussion progresses to compare Amazon with other dominant players in the tech industry. Investor 2 challenges the dominance narrative by stating, “when they come into a space, they come to dominate. We've seen it. Right? And they still have space to grow because healthcare is something that they haven't just come in and dominated yet.” [06:52]. This underscores Amazon’s potential to expand into underpenetrated sectors like healthcare, similar to how other tech giants have historically disrupted established industries.

Investor 3 adds nuance by highlighting Amazon's vast seller base from China—“Now it's estimated that 49% of sellers on Amazon's platform are in China. That isn't scary.” [04:57]. However, Investor 1 counters the concern by labeling this dependency as "dangerous" [05:25], pointing to vulnerabilities in Amazon's supply chain, especially if geopolitical tensions escalate or if China’s manufacturing sector faces disruptions.

Supply Chain and Operational Dependencies

The panel delves deeper into Amazon’s reliance on Chinese sellers, with Investor 1 stressing, “Everything that we buy is made with in China for sure.” [05:38]. This heavy dependence poses risks, particularly in scenarios where trade tensions or global events could disrupt the supply chain, potentially impacting Amazon’s inventory and pricing strategies adversely.

Investor 2 distinguishes Amazon’s segments by highlighting Amazon Web Services (AWS), stating, “AWS is something totally different.” [05:54]. AWS remains a cornerstone of Amazon’s profitability, offering robust revenue streams independent of the e-commerce arm. However, Investor 1 notes the E-commerce segment as a major part of Amazon's business, implying that any strain on this segment could have significant repercussions despite AWS's strength.

Future Growth Prospects: Healthcare and AI Services

Looking forward, Investor 2 emphasizes Amazon’s untapped potential in the healthcare sector and its burgeoning AI services. “Healthcare is something that they haven't just come in and dominated yet. When you add their AI services to...” [06:52]. This signifies a strategic avenue for Amazon to diversify its portfolio and mitigate risks associated with over-reliance on a single sector. The integration of AI could further enhance Amazon’s operational efficiencies and customer offerings, positioning it favorably against competitors.

Investor 3 echoes this sentiment by drawing parallels between Amazon’s AI initiatives and other technological advancements, though his comments are somewhat fragmented: “It's a decaying.” [03:28], “It's like digital Bitcoin, yo.” [04:44]. These remarks suggest both the volatility and transformative potential of AI in reshaping Amazon’s business model.

Profit Margins and Capital Expenditure Concerns

Profit margins emerge as a critical talking point, with Investor 3 questioning, “But their issue is profit margins.” [06:26]. Investor 2 responds by attributing low profit margins to Amazon’s continuous capital expenditure: “Because capital expenditure. They're always growing. They're always building, which is part of business.” [06:36]. This ongoing investment in infrastructure and technology, while potentially constraining short-term profitability, is positioned as essential for sustaining long-term growth and market dominance.

Conclusion: Evaluating Amazon’s Investment Viability

The episode concludes with a nuanced take on Amazon's investment potential. While acknowledging Amazon's formidable presence in e-commerce and the strength of AWS, the panelists express concerns over supply chain dependencies, profit margins, and the competitive pressures from other tech giants. The divergent opinions encapsulate the complexity of evaluating Amazon as an investment in an ever-evolving economic and technological landscape.

Investor 2 maintains an optimistic outlook, noting, “But Amazon's just. I could say, but those are mine. Those are my picks, you know.” [06:24], suggesting confidence in Amazon’s strategic positioning despite the challenges. Conversely, Investor 1 remains cautious, opting to exclude Amazon from his primary investment selections.

Ultimately, the episode underscores that whether Amazon remains a smart investment hinges on various factors including market dynamics, geopolitical influences, and the company’s ability to innovate and diversify its business model.

Notable Quotes

• Investor 2 [00:46]: "In times like this, right? In terms of tariffs, Amazon being E-Commerce, we know that tariffs are going to affect the actual importer, right? So the person that's bringing it in, they're acting as a third-party consumer at this point... That will bring more business to Amazon."

• Investor 1 [01:36]: "Amazon for me is not in my starting five."

• Investor 3 [04:57]: "Now it's estimated that 49% of sellers on Amazon's platform are in China. That isn't scary."

• Investor 1 [05:25]: "That's dangerous."

• Investor 2 [06:52]: "Healthcare is something that they haven't just come in and dominated yet. When you add their AI services to..."

• Investor 3 [06:26]: "But their issue is profit margins."

• Investor 2 [06:36]: "Because capital expenditure. They're always growing. They're always building, which is part of business."

• Investor 2 [06:24]: "I'm not knocking your five. Your five is your five. But yeah. To throw them out like. Nah, bro."

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This comprehensive analysis offers listeners a deep dive into the factors influencing Amazon's investment attractiveness, balancing optimism with caution as the company navigates through global economic shifts and sector diversification opportunities.

Transcript

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[Investor 1]

Repeat the question.

[Investor 2]

I said in times like this, right? In terms of tariffs, Amazon being E Commerce, we know that tariffs are going to affect the actual importer, right? So the person that's bringing it in, they're acting as a third party consumer at this point because they're shipping it to you. They've always been on lower price, lower price, lower price. And so the small business that has to pay that won't be able to do that. That will bring more business to Amazon. Shit, would we. I mean, it might be advantageous. Obviously, I hold large shares in Amazon, but even in this environment, this seems like an attractive place to put some money in. No.

[Investor 3]

Rashad, you want to go first? Because I got a interesting take that I want to bring up about Amazon.

[Investor 2]

Yeah, let's do it.

[Investor 1]

I'm not.

[Investor 2]

That's what we're here for.

[Investor 1]

Amazon's not on my top.

[Investor 2]

Really?

[Investor 3]

Amazon has been as. Go ahead.

[Investor 2]

Rashad, my apologies, but you're not your top. What?

[Investor 1]

Okay, and let's wake it up. This. You got to go with the starting five. Are you down by 20 points? You go with the starting five to get back into the game. Amazon for me is not in my starting five.

[Investor 2]

Who's your five?

[Investor 1]

Nvidia, Microsoft, tsm.

[Investor 3]

You cooking.

[Investor 1]

And. And.

[Investor 3]

That'S the big three right there. Oh, boy. What victory.

[Investor 1]

It's just big me. I'm going with QQQ.

[Investor 2]

No, it's just stop. Not ETFs.

[Investor 1]

That's the rebound. But you need a rebounder. You got to get dirty.

[Investor 2]

No, just stocks. Because Amazon's just. I could say, but that those are mine. Those are my picks, you know.

[Investor 3]

Yeah. Netflix. Boy, hold on.

[Investor 2]

Damn.

[Investor 3]

See, you can throw in Anybody at this point.

[Investor 2]

The fact that you have to wait to think of meta. You're taking matter right now. Who has the biggest monopoly outside of Apple and Nvidia? I'll put those two. You meant Amazon, right? You meant Amazon, right? In terms of sector dominance and when they come into a space they come. They take over multiple sectors.

[Investor 3]

Which leads. Which leads me to my point.

[Investor 2]

Gotta look who else outside of Apple, Microsoft, Nvidia. Do they have a monopoly?

[Investor 3]

What?

[Investor 2]

On what? What's the monopoly on what they have.

[Investor 3]

What the open AI. That shit is running the race.

[Investor 1]

Google has a monopoly on what Search you just chatgpt? No, but they're not. That's not comparable to Google.

[Investor 3]

It's a decaying.

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[Investor 2]

For sure. 500 million people using Chat GPT daily.

[Investor 1]

The two biggest search engines are Google and YouTube. Yeah, and Google owns YouTube.

[Investor 2]

But that's declining. We already know that. So it's not really a monopoly. If you're already concerned for YouTube, that's.

[Investor 3]

A hell of a hit. That's like digital Bitcoin, yo.

[Investor 2]

But somebody's knocking on that door, right?

[Investor 3]

For sure. Come out with like a video.

[Investor 2]

That door is getting kicked in.

[Investor 3]

Interesting stat. 2016 percentage of top sellers in China and Amazon. 242017 22% 201933 to 38% in 2020 percentage of sellers based in China 42%. Right now it's estimated that 49 of sellers on Amazon's platform are in China. That isn't scary.

[Investor 1]

That's dangerous.

[Investor 3]

That. That percentage.

[Investor 1]

That's dangerous of sellers.

[Investor 3]

And also we're not even going to break down who's making.

[Investor 2]

That's not surprising when you. When you. You just made the point. Like everything that we buy is made with.

[Investor 1]

In China for sure. But if China.

[Investor 3]

It's an American company.

[Investor 1]

Yeah, exactly. They decide to be like, no, you're done. We're going to take. We're going to do our own. Like at least MET is not dependent on China. That's actually kind of helpful.

[Investor 3]

Yes. I almost know Amazon has already been.

[Investor 2]

I'm not sure if it's just depending on China because you're just talking about the E commerce business. AWS is something totally different.

[Investor 1]

The E commerce is a major part.

[Investor 2]

It's a major part. But AWS is just as.

[Investor 3]

And for what we just saw walking around. Yeah, but they're.

[Investor 2]

But that's what I'm saying. And they're in there too. And if you looked at Nvidia's partners, that name was there. We saw that. You know his name wasn't there. You see what I'm saying?

[Investor 3]

Oh, for sure.

[Investor 2]

So it sounds good. Like those companies sound good. I'm not knocking your five. Your five is your five. But yeah. To throw them out like. Nah, bro.

[Investor 3]

Fire though, that's.

[Investor 2]

I'm not knocking it. I'm just saying. Hell of a lot of one of them. We're not going to treat them like they. Not for sure.

[Investor 3]

But their issue is profit margins.

[Investor 2]

But why is the profit margin that low? Because capital expenditure. They're always growing. They're always building, which is part of business.

[Investor 3]

We can't for sure.

[Investor 2]

They wanted them ones. Man. I'm standing on that. Who with? Me.

[Investor 3]

But I'll be clear. Amazon ain't with Nvidia on no day.

[Investor 2]

I didn't say that.

[Investor 3]

Okay.

[Investor 2]

I'm just saying outside of Apple and Nvidia, the monopoly space, when they come into a space, they come to dominate. They come to take over. We've seen it. Right? And they still have space to grow because healthcare is something that they haven't just come in and dominated yet. When you add their AI services to.

[American Express Representative]

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[IHG Representative]

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