What is Amazon?

Anthropic committed over $100B to compute deals, 5 GW of TPUs (Google/Broadcom, starting 2027) and 5 GW of Trainium (Amazon).

“It was an over hundred billion dollar commitment.”

An additional $50B is committed to flow into Anthropic from deals with Amazon and Google inked last month.

“We have another $50 billion that'll come in into the future from the Amazon and Google deals that we that we inked last month.”

The four largest AI capex spenders (Google, Meta, Microsoft, Amazon) are at 90% capex-to-cash-flow, above the prior peaks of roughly 80% seen in telecom (1999-2000) and energy (2014-2015).

“We're actually at if you look at the big spenders we're at 90% right now capex to cash flow.”

Knapp explains why AI capex growth is likely peaking by benchmarking current capex-to-cash-flow ratios against the telecom and energy sector peaks that preceded major investment busts.

“One is capital spending is a percent of cash flow or IBIDA interest before interest, taxes, depreciation, and that got to 80% in the telecommunications sector in 99200 and that was the peak. the same thing happened to the energy sector in 2014 2015 during the shale investment boom >> that was kind of peak. Now these companies underlying businesses are growing much more strongly much more resilient companies but we're actually at if you look at the big spenders we're at 90% right now capex to cash flow.”

Many marquee public companies including Amazon, Netflix, and Facebook all broke their IPO issue price, undermining the idea that trading below issue price signals a failed offering.

“What do Salesforce, Netflix, Square, Amazon, Palo Alto Networks, Facebook, Snap, Proof Point, Netswuite, and Coree have No idea. They all broke issue.”

S&P 500 Q2 EPS is on pace to grow 30% year-over-year, excluding one-time AI investment markups from Amazon and Alphabet.

“S&P 500 Q2 EPS is on pace to growth 30% and that excludes the investment markups from Amazon and Alphabet all of their private shares.”

AI capital spending is larger than publicly reported because major hyperscalers carry massive off-balance-sheet leases for Nvidia chips and data centers that have not yet begun.

“Google and Meta and Microsoft and Oracle and Amazon and Nvidia have these massive offbalance sheet leases that have not started yet.”

A meaningful share of reported earnings at Microsoft, Google, and Amazon currently derives from marking up the value of private stakes in Anthropic, OpenAI, and SpaceX rather than from operating performance.

“A lot of the money that Microsoft and Google and Amazon have are basically marking up the value of their stakes in anthropic, open AAI and SpaceX and other companies.”

Altria has outperformed Meta, Microsoft, and Amazon over the last five years despite US cigarette volumes declining 7 to 8% annually.

“Cigarette volume has been declining at 78% in US and guess for last 5 years Altria has outperformed meta I think now Microsoft and Amazon last 5 years.”

Amazon is not profitable for beverage brands but functions as a paid brand-awareness marketing channel, justifying 100 percent early distribution through it.

“We were 100% on Amazon from day one, which was a decision we made as a board to do that. And it was such a good decision, but you don't make a lot of money on Amazon as a beverage. And so, we saw it as a great marketing tactic for awareness.”