The disagreement with the market is narrow. Amazon is valued here at $225 a share against $245.34 at publication, on a sum of the parts: AWS, advertising and residual retail at separate discount rates, plus a $93bn probability-weighted option book for the businesses that do not yet earn. The rating turns on the economics of the AI capital build: how long the infrastructure stays productive, and how much capital each dollar of AWS revenue requires. Competitive position and retail economics are both tested in the memo, and neither moves the conclusion. Those two assumptions account for 47% of the valuation's variance. No other input is close.
What the price implies
Holding every other assumption constant, the price at publication implies a six-year server life against the five Amazon books. That is Alphabet's assumption, and the one Amazon itself used until January 2025. The same price is reached just as readily by a lower capital intensity or faster AWS growth; these are all facets of one question, and the memo puts a number on it without claiming to settle it.
| Assumed asset life | D&A / revenue | Terminal ROIC | Fair value |
|---|---|---|---|
| 3 years | 48.4% | 7.1% < WACC | $151 |
| 4 years | 37.1% | 11.4% | $196 |
| 5 years — Amazon's estimate | 30.3% | 14.0% | $225 |
| 6 years — implied by the market | 25.8% | 15.7% | $245 |
| 7 years | 22.6% | 16.9% | $259 |
Priced at the 60th percentile
Across 20,000 correlated draws the price at publication sat at the 60th percentile of the distribution, which is the reason the rating is hold. The risks are close to balanced: a 7.3% chance of losing more than a fifth against a 4.5% chance of gaining more than a fifth. Consensus at $312.91, with 96% of 66 analysts at buy, is reached in 1.5% of draws. The bear case is uncrowded, and it has no company: short interest is 0.88% of float.
What would change the view
- Overturns itThe industry establishing that AI accelerators stay productive beyond five years; AWS revenue reacceleration against Azure and Google Cloud; Trainium materially cutting the capital required per unit of compute.
- Confirms itCapital intensity rising toward the 2026 guide without a corresponding acceleration in AWS revenue; an advertising margin below 45% on any disclosure; deterioration in AI funding markets, which hits the equity marks, the backlog and reported earnings at once.
- The one thing to monitorThe useful-life disclosure in the next Form 10-K, read together with capital expenditure per unit of AWS revenue. The pairing carries the information; neither figure means much alone.