Amazon's AI Bets Pay Off as Valuation Hits $3 Trillion

Amazon's massive spending on artificial intelligence (AI) has finally paid off. The company hit a $3 trillion valuation for the first time, but what really matters is that its AI investments are starting to generate returns.

The market had been worried about Amazon's colossal capital expenditure, wondering if it would ever translate into profits. But last week's results showed that AWS revenue growth accelerated sharply, with margins expanding rather than compressing. This combination suggests that the capacity Amazon is building is being consumed as soon as it comes online and sold at a healthy profit.

The backlog of future contracted business at AWS has swelled dramatically, jumping by over $100 billion in a single quarter. This gives Amazon and its investors enviable visibility over future revenue and provides justification for continuing to invest aggressively in new capacity.