What Are They Seeing?

Everyone wants to find the next great AI stock.

Wall Street has spent the past year chasing chipmakers, AI software companies, and anything remotely connected to artificial intelligence.
Some stocks have doubled. Others have tripled.
A few have gone completely vertical.

Amazon? Not so much.

However, some of the world’s most successful investors have been buying it.

The core story today — the billionaire convergence on Amazon and…

What are they seeing?

Here is the story. ⇩

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The Convergence

David Tepper, Bill Ackman, and Seth Klarman all made Amazon AMZN ( ▼ 3.1% ) a top holding this quarter.

For two of them, Amazon is their single biggest bet in the entire portfolio.

That kind of convergence, among investors this different, this successful, is not common.

1 David Tepper – Appaloosa Management

#1 holding

Nearly doubled his Amazon position last quarter — now his single largest holding. Four of his top five positions tie directly to AI infrastructure: Amazon, Micron, Alphabet, and TSMC. The one notable cut: Microsoft, slashed 82%.

2 Bill Ackman – Pershing Square

$2.4B position

Built his Amazon stake from scratch about a year ago. Now his second-largest position. Added 19% more last quarter. Also opened a new $2.1B Microsoft stake — while slashing Alphabet by 95%.

3 Seth Klarman – Baupost Group

#1 holding

Amazon has become his single largest holding — notable for a famously conservative value investor who built his reputation avoiding overhyped momentum trades.

Also…

4 Al Gore’s Generation Investment Management and Sanders Capital have both been enlarging their Amazon stakes too.

Sanders doubled its position in Q1 to 29.8 million shares worth about $6.2 billion — now its third-largest holding, behind only TSMC and Alphabet.

5 Institutional investors broadly reported owning 253 million more shares of Amazon last quarter than the quarter before, per Quiver Quantitative data — with UBS Asset Management, Norway’s Norges Bank, and Victory Capital among the biggest buyers.

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Why?

⚠️ Everything else in AI ripped. Amazon barely moved. That gap is the entire thesis.

Amazon’s stock is up just 3.4% year-to-date and 10.1% over the past 12 months — badly lagging a sector where Micron gained 719% and Intel gained 496%.

The same quarter the stock barely moved, Amazon’s cloud division posted what CEO Andy Jassy called its “fastest growth in 15 quarters.” 

For value investors, that gap — a business accelerating while the stock sits still — is the entire opportunity.

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The Numbers.

That $364 billion backlog does not even include the Anthropic deal — Anthropic has committed to spend more than $100 billion on AWS over the next decade.

Amazon previously invested $8 billion in Anthropic and can add up to $25 billion more.

→ Overall Q1 sales grew 17% to $181.5 billion, with operating income at $23.9 billion.

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The Valuation Trick

1 The sum-of-the-parts case

Some investors believe the market is looking at Amazon as one company when it should be looking at several.

Charles Lemonides of ValueWorks estimates that AWS alone could be worth roughly half of Amazon’s $2.5 trillion market value, with Amazon’s retail business accounting for much of the rest. If that’s true, investors are effectively getting Amazon’s rapidly growing advertising business, Prime, streaming, logistics, and other businesses at very little additional cost.

2 27x forward earnings looks pricey. Price-to-cash-flow tells a completely different story.

Amazon plans to spend about $200 billion this year, with most of that investment going toward expanding AWS and AI infrastructure. Those investments reduce today’s earnings, making the stock appear more expensive than it may actually be.

That’s why many analysts prefer looking at price-to-operating-cash-flow instead of earnings during heavy investment cycles.

By that measure, Amazon sits near the low end of its own historical valuation, while Apple trades at nearly twice Amazon’s multiple and near the high end of its historical range.

The argument isn’t that Amazon is cheap by every metric.

It’s that traditional valuation measures may understate the value of a company investing heavily in future growth.

⚠️ One more thing about Apple…
Apple’s premium valuation also comes with a different challenge.

As AI demand pushes memory and storage costs higher, Apple could face increasing pressure on its hardware margins. Passing those costs on through higher iPhone prices isn’t necessarily easy in a consumer environment that’s already under strain.

Amazon, by contrast, is investing aggressively today with the expectation that tomorrow’s AI demand will help justify those costs.

That’s one reason several billionaire investors believe the market may be underestimating Amazon’s long-term earnings power.

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Not a Retreat from AI

Three more stories, all genuinely important, all out-traded by a burger chain.

Notice the pattern is not uniform — Tepper and Coleman are cutting Microsoft MSFT ( ▼ 3.46% ) hard while Ackman is buying it fresh.

That disagreement on Microsoft, sitting right next to near-unanimous agreement on Amazon, tells you something: this is not simple momentum-chasing. These are specific, differentiated bets about which layer of the AI stack — cloud, power, chip equipment, foundries — offers the best risk-adjusted return right now. Amazon happens to be the one name where the most different types of investors landed on the same conclusion.

The Famous Holdout

Berkshire walked away entirely – from 10 million shares to zero

While Tepper, Ackman, and Klarman were building in, Berkshire Hathaway went the other way entirely. The conglomerate slashed its Amazon stake from 10 million shares to just 2.3 million by the end of 2025 — and its most recent filing lists no Amazon holdings at all. Buffett’s old skepticism toward paying up for tech, even tech he respects, appears to have won out.

One other signal worth noting is genuinely ambiguous rather than bearish. Stanley Druckenmiller’s Duquesne Family Office cut its common Amazon stock position by about 94%, down to fewer than 46,000 shares. But he simultaneously doubled his Amazon call options — from 100,000 to 200,000 shares’ worth — a leveraged bet that the stock rises, dressed up to look like a sale on the surface.

Lesson Of The Day:

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