Amazon has been one of the stock market’s brightest stars in the past 25 years. Recently, the aforementioned financial journalist and anchor for Bloomberg TV, Mr. Jon Erlichman, referred to a startling figure, which brings the company’s trajectory into stark relief. Amazon has risen by an amazing 9,000% since a particular story was released on this very day back in 1999, he said. For comparison, a relatively small investment in Amazon at the time would have grown into a life changing investment today, even if that sounds impossible to hear from people who remember the early days of online shopping, when the people were still hesitant to enter their credit card details on a website.
The 9,000 percent increase is so impressive because it is not only the dollar amount, but the significance behind it of Amazon’s transformation. It once was just an online bookstore and in 1999 there was a lot of doubt that it would be able to make it past the dot com bubble that was looming. Fast forward to today and Amazon has changed the world of retail, cloud computing, logistical systems and even entertainment. A rate of growth like that is virtually unprecedented, even for the most successful technology companies. Erlichman’s statement is a good reminder that having a long-term perspective and reinvesting repeatedly into new markets can yield seemingly miraculous outcomes when you first hear them.
Erlichman has previously covered other trends that impact the technology industry. He, for example, revealed that industry estimates suggest that Nvidia, Alphabet, Microsoft and other tech giants will make trillions of dollars in profits within the next five years. These predictions are not just educated guesses, but the result of precise research into the ways in which AI, cloud-based infrastructure and digital advertising are combining to generate huge economic value. In the light of Amazon’s past results and this anticipated performance, it’s easy to see why investors are just as captivated by big tech stocks despite all the years of amazing returns.
On the other hand, Tesla is directly involved in the advancement of artificial intelligence and robotics, a fact that Erlichman highlighted in a separate report, with analysts Dan Ives being very positive about the company. As quoted by Dan Ives, Tesla is much more than a car company, it is a leader in AI and robotics that many investors still don’t understand. Erlichman has been a staunch advocate of the importance of the major tech firms’ shift toward futures based on AI, and Amazon is no exception. The company’s investments in AI powered logistics, Alexa devices and Amazon Web Services’ machine learning tools all suggest a long-term approach to innovation rather than short-term quarterly gains.
There are a few lessons to be learned from Amazon’s success from a book seller in 1999 to a stock appreciation phenomenon of 9,000 percent. First of all, it takes patience more than you think. The gains that were left behind were enjoyed by those who sold Amazon after the dot com crash in early 2000s. Secondly, investors must consider how well a company can reinvest its earnings into new and expanding growth segments, rather than focusing solely on its current profitability. Amazon famously held its profits narrow for years and invested heavily in its warehouses, delivery system and data centres, all of which was risky at the time but led to major competitive advantages.
Meanwhile, there are no investments without risks or fair critiques. Others say Amazon is so large that regulators will take note of its activities, particularly regarding antitrust law and competition in the marketplace. Others remind people that the valuation of the company may have been a little over inflated at times relative to other retail companies or even other technology companies. Then, too, there’s the issue of how Amazon will tackle a future that eventually has to be a less dramatic one of e commerce growth as markets mature. The stock has a very good track record, but past performance does not necessarily predict future performance, and even the most powerful stocks can encounter issues with new technology or a changing consumer base.
But, what’s most useful about Erlichman’s reporting is his ability to put all these numbers in a real-world context. He’s not just making a splash with that Amazon stock has climbed 9,000 percent since 1999! claim. He’s asking us to reflect on why that growth happened, be it Prime or AWS or just the constant concern for customer convenience. All of those milestones brought real, lived in value to millions of people, from small businesses on Amazon’s cloud servers, to families who received packages the same day. It’s that financial insight and human scale observation that make good financial journalism good financial journalism.
