To The Moon

Of all the "Magnificent Seven" stocks in American bourses, Amazon Inc's ( $Amazon.com(AMZN)$ ) post-earnings trajectory was the most prominent and bullish in this earnings season through the month of August 2026. 

Mag 7 Performance in August 2026

Among the Magnificent Seven in August, Apple (AAPL) had the worst performance while the others stayed above par as of the end of July. 

The underlying factors behind Amazon's elevated trajectory across the first couple of weeks of August are related to the ongoing market sentiment over AI monetization. 

Trend Drilldown

Examining trends established as of the first half (H1) of Amazon's Fiscal Year (FY) 2026 provides some basis for the stock's sharp upturn immediately after the second quarter (Q2) earnings were released.

While the company's marketplace segments were running at par with that of the previous FY, the AWS ("Amazon Web Services") segment registered strong growth. If trends were to continue, net sales via AWS would grow by 24-25% over the previous FY. 

This became important in the midst of prevailing market sentiment: the company demonstrated inroads in monetizing AI-relevant infrastructure spends enacted since 2022 more cleanly than almost every other "Magnificent Seven" company. AWS also arguably has the best return on investment: in 2025, AWS delivered well over half of operating income despite bringing under a fifth of net sales - a resilient trend since 2022. 

This has also had a net effect on the bottom line: despite net sales running slightly above par relative to past FY, diluted EPS (earnings per share) is comfortably well over what was earned in the previous FY and is trending to close the current FY with a 40% Year-on-Year (YoY) growth.

Despite these solid gains, it bears noting that over 65% of Amazon's revenue depends on the marketplace and this has been under pressure in the second half of August. Multiple data releases in its biggest market - North America/US - indicates ongoing inflation pressure, shock job losses and a fragile energy price outlook given tensions in the Middle East continuing to choke energy supplies around the world and not receiving proper resolution. 

Even as of H1 2026, the net sales growth outlook indicated softness. If trends were to continue, FY 2026 would register a 6% YoY growth - which stands at odds with the two-digit percentage growth shown in the past two FYs. Given the prominence of the consumer marketplace in the company's sales, inflation effects on reduced spending power in the West weighs on its conviction. 

Doubling Down on AI

Given the facts, it should be unsurprising that Amazon's latest release had heavily emphasized AI arguably more so than ever before. The company announced that its custom silicon Graviton5, a 192-core ARM-based server processor, delivers up to 30-40% better price-performance than comparable instances and that its Graviton series is used by 98% of its top 1,000 EC2 (Elastic Cloud Compute) customers - who access it via the AWS segment. In Q2 2026, its custom chip exceeded a $25 billion annual revenue run rate and grew triple-digit percentages year-over-year. This was true for AWS' AI business as well. 

Amazon also stated that Trainium - another custom, purpose-built machine learning chip from AWS - continues to gain momentum with both Anthropic and OpenAI making multi-year, multi-gigawatt commitments, along with increasing usage by AI startups and unicorns. Simultaneously, the company has added 10+ fully managed foundation models including OpenAI’s GPT-5.6, Anthropic’s Claude Opus 5, Google DeepMind’s Gemma 4, and SpaceXAI’s Grok 4.3 to AWS' Bedrock service that that lets developers build generative AI applications via a single API (Application Protocol Interface). More customers were added in H1 2026 than in the first two years after Bedrock's launch, and customers spent more in Q2 2026 than all prior quarters combined. 

During the earnings release, the company an investment of $1 billion to create AWS Forward Deployed Engineering, a team of AI engineers embedded directly with customers to co-develop and deploy agentic AI solutions in days rather than months. Also announced during the earnings release was a raising of capex on AI infrastructure to $220 billion, up $20 billion from the forecast made in February. At the time, CEO Andy Jassy had stated that this was on account of spiking memory prices and held that expenditure would still not suffice to meet demand. 

The Link to Nvidia

While Amazon has made no claims about competing or supplanting the demand that Nvidia ( $NVIDIA(NVDA)$) is fulfilling and includes in its growth outlook, the rising emphasis on custom silicon builds in Amazon vis-a-vis expanding clientele indicates that a split in the dominance of traditional chipmakers is well underway. However, this needs to be treated with the caution it deserves: Amazon doesn't originate AI demand; it largely fulfills infrastructure asks. An unwind on "ask" would hit the company quite hard: in addition to expending funds on datacenters, it has expended a meaningful volume of cash on chip design R&D and workload processing. 

In contrast, Nvidia might be thought of as being more robust given that it has a large catalogue which it could pivot to (subject to its fab partner TSMC's capabilities). However, well over three-fourth of its revenue comes from the same demand that Amazon now pivots hard into catering. 

This phase of the "AI Hype cycle" is clinically by far the most acute and stressful: an ostensible hyperscaler is competing for chip demand against a dominant chipmaker while opposition to datacenters are reaching a crescendo in the world's largest AI market and macroeconomic factors are seemingly beginning to unwind capital away from tech and into safer harbours that are less tech-adjacent. The risks are manifold; it will be interesting to find out what Nvidia reports today after market close in the wake of its earnings release and what Amazon is almost certainly bound to announce in the days to come. 

 Professional investors with access to European exchanges and a tactical bent of mind might want to lock in this growing conviction by considering the 3X Amazon ETP ( $LS 3X AMAZON(AMZ3.UK)$ ) and the -3x Short Amazon ETP ( $LS -3X SHORT AMAZON (AMZN) ETP(AM3S.UK)$ ) during upsides and downsides of the stock’s trajectory respectively.

Another method of buying into the stock’s growth potential to generate income is the Amazon Options ETP (AMZI), which generates monthly income by buying the company’s stocks, selling up to 5% ‘out-of-the-money’ (OTM) weekly call options on the stock and paying a return on the premia collected.

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For broader articles that deep-dives into business and culture in Asia, visit asianomics.substack.com. Numerous new articles have been published that fully explain the rationale behind the commentary I’ve made in various European publications over the past few months such as the real mechanics driving SK Hynix’s crazy volatility (featured in Bloomberg), Japan’s bullet train tiff with India, and numerous other topics.