Amazon’s Stock Has Badly Lagged Its Mag7 Peers Ahead of Q3 Earnings

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Rundown

But first, a stock getting crushed by its peers.

Market musings

Amazon at a crossroads

You flip on Prime Video for Thursday Night Football and open your laptop. You need a few household items, so you navigate to Amazon and fill up your cart as you watch the game. Why not toss in a few other impulse buys? You’ve already paid your annual fee to ensure free shipping on basically everything the site offers.

After the game you have your sights set on finishing “Reacher.” Eager for more, you ask Alexa when the next season is supposed to come out.

Combine this all-inclusive experience with the fact that AWS is the world’s biggest provider of cloud infrastructure, and you have a situation where Amazon is dominating major aspects of your life.

Surely this has translated to stock-market dominance? Well, not exactly. Amazon is actually by far the worst performer in the Magnificent 7 over the past five years. In fact, it’s returned less than half of the benchmark S&P 500.

The chart above functions as an “AI progress scorecard” of sorts. You have the industry kingmaker Nvidia on top, with by far the biggest return. Bringing up the rear is Apple and Amazon, the two most clear-cut AI laggards. One Wall Street analyst recently confirmed this for Amazon, saying it’s “last place” in the AI cloud race.

Amazon’s position at the bottom adds some crucial context to its recent 14,000 AI-driven layoffs. Despite the fact that the company is everywhere, it’s not translating into shareholder value on par with peers. Now, Amazon is telling its remaining workers to “lean in” on AI, suggesting that cost cuts are one avenue towards regaining market footing.

It’s also indicative of a new era of mega AI layoffs, where the companies lagging industry leaders Microsoft and Alphabet take bold steps to catch up. They need to free up cash to spend on AI experts and data centers, and that’s coming at the expense of other areas.

Amazon’s mass layoffs raise the stakes for its quarterly earnings report, due after the bell today. AWS will be in the spotlight after multiple quarters of flagging sales growth. Perhaps not-so-coincidentally, AWS is also a business living in fear of more layoffs. Less than 1% of AWS in the US was impacted by this week’s cuts, but employees told BI they think the ax will fall in early 2026.

This all begs the question: Can Andy Jassy’s lumbering giant job-cut its way back to glory? Even if the strategy works, Amazon still has a ways to go to rival its fellow AI competitors.

On the move

There’s nothing like a chart that perfectly encapsulates the dashed hopes and dreams of investors.

In this case, we have the S&P 500 chart from Wednesday. The index immediately dove lower after Fed Chair Jerome Powell said a December rate cut is “far from” a foregone conclusion. This was news to traders, who were pricing in a high likelihood of another 25-basis-point cut. Those odds have since tumbled.

The S&P 500 came back after the initial knee-jerk move lower, but the overall point stands that the market — near record highs — is priced to perfection. If investors don’t get exactly what they’re expecting, tantrums like this will keep occurring.

BI market mix

MVP of the week

This recurring section will highlight individuals who have dominated the week in markets.

This week’s First Trade MVP is Ravi Jaipuria, the founder and chairman of RJ Corp., an India-based conglomerate that spans food, beverage, healthcare, and education. The majority of his net worth comes from the subsidiary Varun Beverages, which is a PepsiCo franchisee that has more than 1 billion customers.

Varun Beverages (and therefore Jaipuria) got a big boost from third-quarter earnings on Wednesday. The company reported revenue, net income, and EPS that handily beat analyst estimates, which sent shares up 9% in a single session.

Other highlights of the report included the company’s interest in expanding into alcoholic beverages, as well as an exclusive distribution pact with Carlsberg.

The 9% share spike pushed Jaipuria’s net worth to $13.7 billion, up from $12.5 billion at Tuesday’s close, according to data compiled by Bloomberg and Forbes. He currently sits as the 206th-richest person in the world.

Pro tip

Business Insider’s Will Edwards highlights investing recommendations pegged to the biggest trends in markets.

Looking for a way to hedge against a potential AI bubble? Traditional wisdom says to reduce equity exposure and park some money in the fixed-income market.

But with yields falling as the Fed cuts rates, Jason Browne, the founder of Alexis Investment Partners, has a better idea: buy momentum indexes.

Momentum indexes like the iShares MSCI USA Momentum Factor ETF (MTUM) overweight the stocks in the S&P 500 that are outperforming most recently. But there are a couple of catches.

First, the indexes don’t offer downside protection for quick market drawdowns, since they take time to adjust. Second, they don’t work during cyclical bear markets when everything falls.

But they are great for when one area of the market — like the tech sector — enters a lengthy rough patch.

This is seen by some as an inevitability, with AI-stock valuations historically extended. Browne says that if investor expectations aren’t met, we may see a repeat of the dot-com bubble, when tech stocks got beat up for a few years while other parts of the market stayed afloat.

If that’s the case, momentum strategies should benefit as they start to track new leaders, like they did during that era. Browne says that, during the period from 2000 to 2002, he worked at a firm whose momentum strategy provided a roughly-10% return while the rest of the market was melting down. It worked because it naturally rotated into more defensive names.

“You’re getting the opportunity to continue to ride this wave while it continues, but also have a built-in exit strategy if you believe that the kind of bear market that we’re likely to potentially transition to at some point is more rotational in nature,” Browne said.

— Will Edwards

The First Trade team: Joe Ciolli, executive editor and anchor, in Chicago. Akin Oyedele, deputy editor, in New York. William Edwards, senior reporter, in New York. Steve Russolillo, chief news editor, in New York.