$Amazon.com(AMZN)$ Today's drop seems to trace back to the media estimating OpenAI at $70B ARR a few weeks ago, then updating or correcting that figure to $50B ARR. Not OpenAI's fault that the media messed it up, but it is what it is. They used gross ARR in one case and net ARR in another. OpenAI's business is still growing fast at 70% since July.
Either way, the OpenAI commitment to AWS is being framed by doomers as a huge risk. But the reality is it spreads over 8 years, or $12.5B annualized. That works out to roughly 2.5% to 6.94% of AWS business over the next 5 years. If it disappeared completely, life goes on. The $50B equity stake is around 1.8% of our current market cap.
Similar situation with Anthropic. Their commitment is $110B over ten years, or $11B annualized, which is 2-5% of AWS revenues. But the equity stake would be more of a hit since AWS marked it to market. In reality though, this stock has no AI premium priced in for AI anyway. It is priced around the same as before any of these deals were announced or running. That part is a bit crazy in itself.
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