Hello, Reader. 

Picture it: Tesla Inc. (TSLA) CEO Elon Musk deftly cruises his Scotty dog token across a Monopoly board. Suddenly, Amazon.com Inc. (AMZN) founder Jeff Bezos races through GO in his race car, collects $200, and is ready to further expand his vast fortune.

These two billionaires own, and profit from, companies that dominate different industries – Tesla in EV manufacturing and Amazon in e-commerce and cloud computing.  

In this high-stakes game of wealth accumulation, where Monopoly meets reality, Musk and Bezos have long jostled for the title of “Richest Person in the World.” 

And as of Tuesday last week, Bezos holds the lead.  

Last month, Bezos netted $8.5 billion from selling millions of Amazon shares. And, as the company has surged more than about 17% year-to-date, Bezos’s 9.56% stake brought his net worth to a staggering $200 billion last week.  

Meanwhile, Tesla has seen a downturn in earnings and revenue, with shares falling about 34% year-to-date. Now Musk falls $2 billion behind Bezos, with a net worth of $198 billion. 

So, Bezos has officially dethroned Musk as the wealthiest person in the world.  

In today’s Smart Money, let’s investigate why Amazon is outperforming Tesla (and making Bezos richer in the process) this year, what it’s focusing on now to further grow its business, and whether it’s still a good “Buy”… 

Buying Boardwalks and Stacking Hotels 

The big catalysts behind Amazon’s rise, and Tesla’s fall, this year were their fourth-quarter earnings reports.  

Tesla was up to bat with its quarterly results on Wednesday, January 24. The EV manufacturer reported earnings of $0.71 per share on revenue of $25.2 billion – slightly short of analysts’ estimates for earnings of $0.74 per share and revenue of $25.6 billion. Operating income fell $2.1 billion year-over-year, due in part to the lowered price tags for Tesla’s EVs, and a rise in operating costs “partly driven by AI and other R&D projects.” 

Investors were unhappy with the news – sinking Tesla stock more than 12% lower the following day. 

Amazon shares, on the other hand, popped 8% after reporting strong earnings results on Thursday, February 1… and have been trending higher ever since. 

Amazon reported 13% revenue growth in the quarter, which produced a spectacular 383% jump in operating income. On a per-share basis, Amazon reported net earnings of $1.03, compared to $0.23 the prior year.  

For 2023, Amazon reported a tripling of operating income on revenue growth of 12%. 

Amazon’s core Stores business, which produces the bulk of revenues and earnings, continued to fortify its competitive strengths. 

In the fourth quarter, Amazon delivered packages to Prime members at the fastest speeds yet, with more than 7 billion items arriving the same day or next day, including more than 4 billion items in the United States and over 2 billion in Europe. 

Incidentally, that averages out to more than 10 packages per American per day. That’s a lot of shopping! 

The company’s data center operations, Amazon Web Services, also racked up solid growth in the fourth quarter. Revenues grew 13% and approached an annual run rate of $100 billion. 

Customers’ loyalty toward Amazon’s services cannot be overstated. Their ongoing satisfaction has propelled the company to new heights, solidifying its dominance in the market. 

Their persistent innovations efforts – one of the keys to Bezos’s success – also includes artificial intelligence, which promises even further growth.  

Amazon Dives Deep Into AI 

Amazon is also ramping up the AI functionality of its cloud offerings as quickly as possible. 

Its AI strategy focuses on providing solutions at three distinct layers of the generative AI stack… 

• The bottom layer, where customers are building their own AI models. 
• The middle layer, where customers are using existing large language models and customizing them with their own data. 
• The top layer, where customers design and tweak AI applications. 

Amazon has developed proprietary solutions for each level of this stack. At the top layer, for example, the company recently launched Amazon Q, which is a generative AI coding companion. 

It can write code, and then test and debug that code. It can also query customers’ various data repositories, and then summarize that data as directed by the customer. 

But Amazon is not only enabling its customers to develop AI apps; it is also building dozens of proprietary generative AI apps across all its businesses. 

One month ago, for example, Amazon launched Rufus, an expert shopping assistant that answers “shopping journey” questions like “What’s the best golf ball to use for better spin control?” or “Which are the best cold-weather jackets?” 

Rufus answers these questions by providing thoughtful explanations and/or specific product recommendations. 

Amazon has also built an app that summarizes customer product reviews, and another that allows customers to predict what kind of fit they’d have for different apparel items, and yet another that forecasts how much inventory each Amazon fulfillment center should hold. 

The bottom line: Amazon’s relentless expansion through its Stores business, Amazon Web Services, and AI construction all helped grant Bezos his title… and make the company an excellent long-term hold. 

The Most Disruptive Force in History? 

Of course, Amazon isn’t the only big-name company incorporating AI into its business.   

For instance, Microsoft Corp. (MSFT), Alphabet Inc. (GOOGL), and Apple Inc. (AAPL) are all making heavy AI investments. There are big players in the healthcare industry, too:  Nvidia Corp. (NVDA) and GE Healthcare Technologies Inc. (GEHC) have been ramping up AI funding. 

So, I think Elon Musk was right on the money – or at least close to it – when he called AI “The most disruptive force in history.”  

Right now, it’s impossible to fully predict what an AI-driven future will bring.  

However, we do know that AI is going to be as disruptive to today’s global economy as electricity and the internet were to theirs, so I can tell you that our world will look radically different than it does today.  

And it’s time to start reckoning with that future. 

This is why I’m issuing an AI Code Red. It’s the most urgent warning of my 30-year career. Click here for all the details. 

Regards,  

Eric Fry