Amazon market cap crosses $2 trillion for the first time; what’s fueling the rally?

The market capitalisation of Amazon Inc, the Washington-headquartered technology behemoth, has crossed $2 trillion for the first time ever. The milestone was achieved after the Jeff Bezos-led company emerged as one of the top gainers during the trading session on Wednesday, June 26.

At the NASDAQ, Amazon’s stock closed at $193.61 apiece, which was $7.27 or 3.9% higher as against the previous day’s close. The spurt in shares took the company’s market capitalisation to $2.01 trillion – making it the only fifth US listed company to cross the mark.

Earlier in April, Amazon’s mega-cap peers – Apple and Microsoft – crossed $3 trillion in market cap fueled by the growing enthusiasm in the US stock market for artificial intelligence. Nvidia, the AI-focussed chipmaker, witnessed the sharpest climb, with its market cap crossing $2 trillion in April-end, and surging briefly surpassing $3 trillion last week.

Here’s a look at what pushed Amazon’s m-cap:

Business restructuring

Amazon, since the start of this year, began implementing business restructuring measures that excited investors. The company began introducing AI into its operations, and eliminating roles that were redundant.

In January, Amazon said it was laying off hundreds of staff of Prime Video and Amazon MGM Studios. In the same month, the company-owned streaming platform Twitch and audiobook app Audible also announced job cuts.

In April, Amazon Web Services (AWS), the company’s cloud computing arm, said it was slashing hundreds of tech, sales and marketing jobs.

In May, Amazon fired more than 100 customer service managers, who accounted for around 1% of its global customer service workforce.

AI enthusiasm

According to analysts, Amazon shares have benefitted from the overall enthusiasm for artificial intelligence in the US market. AWS, which has adopted AI technology to sharpen its services, has seen a re-acceleration in its business.

AWS recorded $25 billion in net sales in the first quarter, and the forecast is stronger for the upcoming quarters. AWS segment operating income was $9.4 billion, compared with operating income of $5.1 billion in first quarter 2023.

“This is one of the factors why Amazon shares are gaining momentum,” a New York-based market analyst commented.

Strong Q1 results

A strong factor behind Amazon’s rally is the strong results posted in the January-March period. The company’s net sales increased 13% to $143.3 billion in the first quarter, compared with $127.4 billion in the first quarter 2023.

Operating income increased to $15.3 billion in the first quarter, compared with $4.8 billion in the first quarter 2023.

The company’s shares have jumped by around 12% in the past two months, after the Q1 results were declared.