Amazon

AMZN

Market cap $2.66T

Big tech hyperscalers like Amazon, Alphabet, Microsoft, and Meta are positioned for significant free cash flow growth as CapEx investments begin to yield returns post-2028. Semiconductor and memory stocks have led the market, but expectations are now high, making risk-to-reward more attractive in hyperscalers and select software names.

A deluge of hyperscaler debt creates risk that investors will run up against concentration limits in their portfolios from a single company or industry.

Amazon is launching Amazon Supply Chain Services, leveraging its logistics infrastructure for external customers beyond its core e-commerce, AWS, and advertising businesses. ASCS targets residential parcel delivery, offering lower rates and simpler pricing to attract third-party volume, improving network utilization and operational efficiency. Base and strong case scenarios suggest ASCS could contribute 2–5% of annualized operating income, with the primary benefit being cost savings in Amazon's retail logistics.

Valuations for these tech titans have fallen to multiyear lows. More importantly, however, they continue to generate robust financial results.

The market is selling Amazon over falling free cash flow, a $200 billion capex program, and circular AI financing, whilst I see all three as reasons to buy. Advertising generated $17.24 billion in the quarter, with software-like margins that the market still values as part of a retailer. Retail automation is a second catalyst. AWS backlog stands at $364 billion (excluding a $100B+ Anthropic deal), with diversified customers and custom silicon driving competitive advantage.

As the cost of AI infrastructure continues to increase, Morgan Stanley says Big Tech capital expenditures are on track to hit new records.

The Dividend Income Accelerator Portfolio emphasizes high-quality companies with sustainable dividends, strong balance sheets, and attractive valuations to optimize risk-adjusted returns. I prioritize a diversified mix of ETFs and individual stocks across sectors, balancing dividend income, growth, and capital appreciation while mitigating downside risk. Key metrics include a 3.75% weighted average dividend yield, low payout ratios, and low beta factors, supporting long-term portfolio resilience.

Heavy spending on capital expenditures seems to have spooked some of its investors. However, this spending has helped to accelerate Amazon's revenue and profit growth.

Morgan Stanley said a range of factors, including AI backlash, are driving up costs.

I hit the buy button on Amazon (NASDAQ:AMZN | AMZN Price Prediction) again last week, and I plan to do it again this month.