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🗞️ Is Amazon Undervalued?
PLUS: Why is Home Depot rising?
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Market Performance
S&P 500: 6,411.37 (⬇️ 0.59% )
Nasdaq: 21,314.95 (⬇️ 1.46%)
Dow Jones: 44,922.27 (⬆️ 0.02%)
SoftBank Throws $2 Billion at Intel
Amazon's (AMZN) cloud division AWS remains the clear market leader, but the gap is narrowing as competitors accelerate their AI investments.
Loop Capital raised Amazon's price target to $300 (30% upside potential), betting that AWS will hit its generative AI inflection point in the second half of 2025 and into 2026.
The numbers tell a compelling story 👇
AWS generated $30.87 billion in Q2 revenue (18% growth) and $10.2 billion in operating income, representing 18% of Amazon's total revenue.
CEO Andy Jassy emphasized that "the second player is about 65% of the size of AWS," highlighting their substantial lead.
However, Microsoft and Google are gaining ground fast. Microsoft's Azure grew 39% with revenue exceeding $75 billion annually, while Google Cloud posted 32% growth to $13.62 billion. Both reported stronger growth rates than Amazon's 18%.
AWS faces supply constraints, particularly around power infrastructure needed for AI workloads. Jassy noted these shortages will persist as demand for AI computing continues to surge.
Despite challenges, Amazon's security advantages and massive scale position it well for the AI boom ahead.
We can see that Amazon stock has a Ziggma score of 89, and ranks in the bottom percentile in terms of valuation.
Our Takeaway
AWS's market leadership provides a solid foundation, but accelerating competition means Amazon must execute flawlessly on AI infrastructure to maintain its dominance.
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Market Overview
Technology stocks led Tuesday's decline, with the Nasdaq falling 1.46% as investors took profits after the index's 40% run since April.
Nvidia dropped 3.5%, AMD fell 5.4%, and Palantir tumbled 9%, making it the S&P 500's worst performer.
The selloff reflects normal market recalibration rather than a fundamental break in the AI trade.
As Jayson Bronchetti from Lincoln Financial noted, "After a 40%+ run for the NASDAQ since April, historically a pause is normal as the market recalibrates around the latest economic data and anticipated Fed policy."
The Dow bucked the trend, touching a fresh record high powered by Home Depot's 3% gain.
Housing data showed mixed signals, with starts rising 5.2% but permits declining 2.8%, reflecting ongoing challenges in the construction sector.
Fed futures indicate an 85% probability of a September rate cut, with investors awaiting Jerome Powell's Jackson Hole speech on Friday for policy clarity.
Treasury Secretary Scott Bessent announced Fed chair interviews will begin after Labor Day from a field of 11 candidates.
Stock Moves Deciphered 📈
Intel (INTC) - The tech stock jumped 7% on SoftBank's $2 billion investment at $23 per share, providing crucial capital as the chipmaker works to regain competitiveness in AI semiconductors.
Prologis (PLD) - The industrial REIT climbed 5% after Mizuho upgraded it to Outperform, citing occupancy upside, lower execution risk, and an attractive setup ahead of potential Fed rate cuts.
Nexstar (NXST) - The broadcasting stock rallied 8% on an agreement to acquire competitor Tegna for $3.54 billion, consolidating the fragmented local television market landscape.
Headlines You Can't Miss
Trump expands steel/aluminum tariffs to include 407 additional product categories affecting machinery and chemicals.
Brazilian stocks slide with iShares Brazil ETF down 3.3%, posting the worst day in over a month.
Housing starts rise 5.2% in July to 1.428 million annual rate, beating estimates despite permit decline.
Hedge funds net bought US stocks at the fastest pace in seven weeks, driven by macro products purchases.
European defense stocks tumble 2.2% after Trump-Zelenskyy meeting raises hopes for Ukraine peace deal.
Fed interviews for next chair position to begin after Labor Day, from 11 candidates, says Treasury Secretary Bessent.
Trending Stocks
Palo Alto Networks (PANW) – The cybersecurity giant jumped almost 5% in pre-market trading after quarterly results topped Wall Street estimates and issued better-than-expected guidance for Q1 and full year.
The strong performance comes weeks after announcing plans to acquire Israeli identity security provider CyberArk for $25 billion, its largest deal ever, signaling aggressive expansion in the identity security space.
CEO Quote🎤: “We exited fiscal year 2025 with an acceleration in RPO, and surpassed the $10 billion revenue run-rate milestone, positioning ourselves well for sustained growth ahead."
Home Depot (HD) - The home improvement giant rose 3% despite missing Q2 estimates with earnings of $4.68 vs $4.71 expected. Revenue of $45.28 billion also fell short of $45.36 billion consensus.
Same-store sales grew just 1.0%, though this marked only the second positive comp in eleven quarters. Despite two consecutive profit misses, management maintained full-year guidance, suggesting confidence in second-half improvement.
CFO Quote🎤: “We don’t embed any point of view on the rate environment changing, nor on the demand for large projects changing.”
Viking Therapeutics (VKTX) - The stock plummeted 42% after disappointing midstage obesity pill trial data failed to impress investors.
The biotech's market cap dropped from over $4 billion to $2.7 billion, dealing a blow to the company once seen as a hot M&A target. Results may reinforce Eli Lilly and Novo Nordisk's dominance in the weight-loss drug market.
What’s Next?
Key Earnings 👇
Analog Devices (ADI): Q2 revenue forecast at $2.76 billion vs. $2.31 billion last year. Adjusted earnings are expected to grow from $1.58 per share to $1.95 per share.
Target (TGT): Q2 revenue forecast at $24.9 billion vs. $25.45 billion last year. Adjusted earnings are expected to narrow from $2.57 per share to $2.04 per share.
Estee Lauder (EL): Q2 revenue forecast at $3.4 billion vs. $3.87 billion last year. Adjusted earnings are expected to narrow from $0.64 per share to $0.09 per share.
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