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All right. We mentioned Amazon as well. We should probably talk about that, shifting gears to another member of the magnificent seven, Amazon, the e-commerce giant beating Wall Street estimates on both the top and bottom lines, $158.8 billion in sales and an 81% increase in capital expenditures driven by some of those artificial intelligence investments here. Joining us now to break down some of these results and what's next for Amazon? We've got Nick Jones, Citizens JMP equity research analyst. Great to have you here with us, Nick. All right, so, first and foremost,

let's just zero in on the amount that they're investing within artificial intelligence. Is this for what the street is anticipating and how aggressive they are going to continue to be in spending. Is this kind of something that is a good marker? Is this something that you hope they begin to taper off sooner rather than later?

Yeah, I, you know, I don't think folks expect spend to taper off. Uh, you know, this is an environment, you look back in history, you know, companies who maybe didn't spend ended up losing down the road, uh, by not being prepared for kind of the coming technology. So I think when you kind of hear commentary from Google, Meta, um, Microsoft, Amazon, uh, spend is going to keep coming here. AI is this massive, massive opportunity. We're only a year or so into the opportunity. So we're probably looking at a very long runway of spend. Um, I think investors are really just trying to get their arms around what should that level be? You know, for Amazon, uh, they guided 75 billion in capital expenditure this year. Uh, the only color they gave us for next year was they'd likely spend more. Um, you know, conversations with investors, we're hearing people already kind of earmarking 90 billion plus. That's 20% year over year on capital expenditures. So it's a huge opportunity. Most companies are capital, not capital straight, their capacity constrained, uh, really with chips being the choke point. So given how big the opportunity is, we're probably going to see a lot of spend here for the next several, uh, years. That said, Amazon delivered really good operating income margins. Um, that appears to be the key indicator for the stock now, and it's really interesting because over the last couple quarters, it was really AWS growth. Now it's coming down to, hey, we're ready to give you guys growth with expanding margins, and that's what they've been delivering.

And that was a nice surprise here for the street. Going back to that spend real quick, it sounds like you're comfortable with those levels, Nick.

Yeah, Amazon's a dominant cloud player. Uh, they're going to want to be dominant in AI. They need to keep spending. I'm very comfortable with their spend. I prefer they spend versus kind of getting behind the eight ball down the road and not having the capacity or the chips to provide their customers what they want, um, from an AI perspective. So, um, I think it, uh, you know, this is a little inflammatory, but it's kind of spend or die kind of environment where if you, you know, if you let your competitors get ahead, you will be behind in the future.

Yeah. Well, we heard Jesse call it a once-in-a-lifetime type of opportunity. Nick, what does that longer-term potential then look like here for Amazon?

Um, it's just massive. You know, when we look at, um, IT spend, I mean so much is still on premise. That's going to move off premise to the cloud, you know, from internally managed servers to, uh, to the cloud. Um, you know, he said about 10% um is has shifted, and he thinks that ratio will switch where 90% will be shifted and 10% will be on prem. Um, you know, we verified that with kind of our analysis, and we think that's right. There is just a multi-decade runway here, uh, for everything shifting to the cloud, from the media we consume, um, to the processes we do at work, uh, to where we store our files, um, across the board. So, um, we agree. It's a massive, massive opportunity that deserves kind of the spend it's getting.