Tomb Raider
Once upon a time, Amazon boosted its capital investment 49%. Spending out-raced its revenue growth by a mile. Sales grew 29% compared to the year before and look to do the same again. That's before considering investments it made through its P&L. That spending increased too. Operating margin ticked down. This dragged on cash flow. Investor Nick Sleep wrote about all this back in 2009.
Lamplighter wrote about many of the same things in mid-May. Most of Nick's observations of the business from 2009 still fit today. Some of the investor perceptions still fit too. Amazon's spending a lot on growth — the future. A lot of investors care about the present or next few months. Amazon's spending on risky things and things with open questions — AI data centers to serve future agents that don't exist yet, AI chip design, AI networking. Investors care about certainty.
Nick's insight wasn't just as a business analyst or as a psychoanalyst of investor behavior. He had a nose for situations where those things collided. Opportunity loves tension.
Sifting through the rubble
Back in 2008, shareholders aimed a few pointed gripes at management:
"Your cash flow is fading, give it back to us investors!"
"Your growth spending has no value."
But it wasn't just Amazon's spending that created tension with investors. The Great Financial Crisis weighed on markets. Investors were understandably skittish of the whole market, not just Amazon. A consequence of their undiscriminating behavior, Nick observed that they left Amazon's growth for dead. In hindsight, those investors’ position looks naïve. Amazon exploded ten times larger between then and now and created enormous value.
The controversy at Amazon is the same again. Its astonishing AI spending has chipped at cash flow. It fell from $38BN in 2024 to just $11BN in 2025. It increased its technology investment by $60BN, conservatively, over the past two years. Investors worry what kind of return it’ll get on that. If it instead redirected that spending to shareholders along with its actual cash earnings, that gets it to more than half of Amazon's value today. Investors again are telling Amazon "we’re not so sure about all that spending."
Meanwhile, the company just inked an expansion of its relationship with Anthropic. Anthropic has grown faster than any company ever. It makes money today. It would make more except it can’t buy enough computers. Amazon's also invested to keep its infrastructure costs as low as possible, enabling it to share value with its customers. This was another of Nick's favorite investing corners — companies that leave some margin on the table for their customers. It sure looks like demand is there and Amazon will be able to make it profitable.
New Era
Today, US markets hover around record highs. The backdrop of Amazon is vastly different than 2008. The controversy at Amazon isn't as black and white as then. It's subtler. Amazon's investment level looks terrifying. Hundreds of billions of dollars are flying out the door. Investors aren’t quite valuing that growth at zero, but it doesn’t look expensive either. On the other side, revenue looks healthy. Margins look good. Demand looks heady. In fact, Amazon’s struggling to keep up. For the patient Investor, AI looks set up to be another solid era for Amazon.
Disclaimer: None of this is investment advice. It's meant to illustrate ways LCM thinks about investing. Things that LCM decides are good investments for LCM and its clients are based on many criteria, not all of which are covered here. Some or all of LCM's ideas may not be suitable for other investors. LCM does not recommend investing either long or short any position mentioned. LCM may own positions in some of the companies mentioned. Some of its ideas will lose money — investing entails risk. See full disclaimer here.