Another Trillion Dollar Company 🤑
Amazon's market value surpases $1 trillion
A month after Apple became the world’s first trillion dollar company, Amazon surpassed the same milestone on Tuesday. Amazon, who is only 24 years old, has reached this historical milestone with no signs of slowing down. Apple and Amazon now make up more than 8% of the total value of the S&P 500 stock index.
Tech boom or bust?
There is debate around whether this landmark event is a sign of a prosperous future or an imminent market crash. Amazon's $1 trillion feat has sparked more concern than Apple as many analysts view Amazon as having sold “excitement” rather than products. Investors are taking a gamble on what Amazon could be rather than what it is now; the question is, are they right?
Skeptical outlets argue that investors are playing a dangerous game of betting too highly on potential. They argue that new Amazon ventures, acquisitions (e.g. Whole Foods), and so-on have given Amazon the image of being a relatively safe investment compared to other tech companies. And yet their profit margins are still minuscule with tons of money being spent on new ventures.
Optimistic outlets argue that Amazon’s diversification strategy and market dominance make it a stable investment. While Apple has maintained a focused approach to market expansion, Amazon has been aggressive, and mostly successful, in expanding into new business lines. 45 of the 47 Wall Street analysts with ratings on Amazon still rate Amazon as a stock to buy.
Amazon is undoubtedly one of the most successful and innovative companies in the world. And yet, we must be cautious when it comes to its valuation. Wall Street's recent trend of valuing certain tech companies with exorbitant potential (but little profit) is to some degree worrying (think Tesla). As of now, we have no way of knowing whether history will record the last 30 days as the beginning of a tech boom, or the foreshadowing of a crash.
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