Source: Zhitong Finance "Since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%)." With the rebound of the stock market, the old adage "Sell in May and Go Away" seems to have been a bad advice once again. Last month, the S&P 500 index rose 4.8%, the best May performance since 2009. The NASDAQ 100 index rose nearly 6.2%, and the NASDAQ Composite Index rose 6.9%. Goldman Sachs FICC & Equities Trading Division said: "History doesn't really support this saying. Don't sell, leave the market (go on vacation), and enjoy the good times." The rising trend is still to be continued? If history is any guide, it may indicate that the rise of the stock market is not over yet. Looking ahead to the rest of 2024, Scott Rubner, Managing Director of the Goldman Sachs Global Markets Division and tactical expert, pointed out the following historical background for investors. Rubner stated that the S&P 500 index has risen 10.7% year-to-date, and since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%). "Since 1950, the median return of the last 7 months of each year (June 1 to December 31) is 5.4%. In the aforementioned 21 cases, the average performance of the last 7 months increased to 8.1%." Rubner added. Rubner also pointed out that the NASDAQ index has risen for 16 consecutive Julys, with an average return of about 4.64%.

$Amazon (AMZN.US)$ Amazon reported strong third-quarter earnings in post-market trading on Thursday. At the earnings conference, Amazon stated that it expects a total capital expenditure of $75 billion for the whole year. By 2025, the majority of AWS business will be driven by generative artificial intelligence. Currently, it is a significant business with annual triple-digit growth rates that are increasing rapidly, faster than the development of AWS. As a result, the cash lifecycle of the AWS business is in need of faster investments in networking equipment and hardware, while also continuously empowering customers to gain more resources.

Additionally, Amazon mentioned that many assets have a useful life of many years, especially for data centers with at least a 20-30 year lifespan. This can further drive enough revenue and free cash flow conversion to make it a business with good investment returns. In the field of generative artificial intelligence, this could be a rare opportunity, and shareholders are satisfied with such long-term development.

Regarding the third-party business in online shopping, Amazon revealed that currently, 60% of the paid products in Q3 come from third-party sellers, an increase from 59% over the past two years. The visible impact is the clear demand from buyers for daily necessities, with order volumes increasing rapidly. Daily essentials are more inclined to be sold through Amazon's own products rather than third-party sellers' products.

Q&A:

Q: The improvement in AWS profit margin is related to a 200 basis point increase in security and maintenance, how to consider its sustainability? How to consider Q3 capital spending and last year's capital spending?

AWS achieved a year-on-year increase in profit margin, primarily driven by three key factors: 1) Accelerated growth in revenue demand, helping to further improve efficiency, with significant cost control efforts; 2) Further improvement in the effective lifespan of servers leading to a 200 basis point increase in profit margin; 3) From a cost control perspective, we have focused on team recruitment and staffing with more precision. Our office staff decreased slightly year-on-year, remaining steady with the end of last year. We are continuously enhancing team efficiency, including sales teams, production teams, and infrastructure areas. Infrastructure accounts for a significant part of AWS cost structure; therefore, we have better matched demand to further drive cost efficiency. In the segmented market, we need a better understanding of how to ensure the current investment level and investment levels in innovation and product development. We have also introduced more new products and services and have done a great job in sales staff allocation, funding and costs, as well as specific implementations in chip technology to achieve a good balance of supply and demand, resulting in robust business growth.

In terms of capital expenditures: It is expected to have a total annual capital expenditure of 75 billion, with most of the AWS business in 2025 mainly driven by generative artificial intelligence. It is currently a vast business, growing at a double-digit percentage rate every year and accelerating. Compared to the rapid development of AWS, the cash cycle of the AWS business is like this. We need to invest faster in network equipment and hardware. While helping customers obtain more resources, we are also constantly empowering them. In addition, many assets have a lifespan of several years, especially for data centers, with a lifespan of at least 20-30 years. Therefore, we can further drive sufficient revenue and free cash flow conversion into a business with a good investment return. This may be a rare opportunity in the field of generative AI, and shareholders are satisfied with this long-term development.

Q: Now with Amazon's development in the field of artificial intelligence, the prices are very competitive. As the AWS business continues to grow, what are the expected profit margins and ideal profit margins for artificial intelligence data centers next? How can further growth be achieved in artificial intelligence workloads?

Currently, there are around 35 centers globally with multiple data center nodes. There are currently over 130 available zone data centers with over thousands of SKUs. We must implement these facilities. If the service is poor, customer service will be interrupted. If most customers feel the service is inadequate, the economic benefits will be very low. We have done very well before, that is we have been able to provide good capacity support. We believe that artificial intelligence is still in its early stages and relatively, it needs to be smoother than the AI part in AWS. However, it is also impractical for most consumers to demand 0.03 million chips in a day. In fact, we can have good planning for demand to understand how much preparation needs to be done in advance.

Early artificial intelligence development has similarities to other products. As the product is relatively new, there is a lot of interest and rapid development. So, overall, the profit margin is slightly lower than what we consider the level to be, but the profit margin of our AWS has been significantly different from 2010 to now. I believe that as the market continues to mature, it will bring a very healthy profit for generative AI in the future.

Q: How to consider the drivers of international retail operating profit? What are the future profit margin expectations?

There is seasonal fluctuation, but there is a positive trend, progressing and staying above 0. In the past seven quarters, the profit margin has achieved year-on-year growth. Similar factors can be observed in the North American market, with low service costs, significant contribution from advertising, and the choice of faster delivery speeds can further drive consumer demand. Our international business is a mix of mature countries, including the United Kingdom, Europe, Japan, and some other emerging countries, including 10 new countries and regions we launched in the past few years. Each country definitely has a different development path, from product usage to customer adoption to expanding profit margins. Our expectations for each country meet and reflect our expectations for North America, and as time goes on, we will further improve the profit margin in North America. This is not static. So far, we are satisfied with the overall performance, and we also need to consider the customized development of each country and region.

Q: After many years of investment in robot technology, what is the current progress? What is the biggest investment direction for robot technology in the warehouse network next?

We believe we have very broad, extensive, and advanced capabilities in automated robotics that can meet the needs of our logistics distribution network. However, so far, our robotic automated fulfillment is still in its early stages. We have 5-6 very important new robot functions, including stacking, picking, packaging, transportation, etc., hoping to integrate all functions into the same workflow to further enhance work efficiency. For example, a factory in Los Angeles just started a few weeks ago, and we have seen some very pleasing results.

Why do we need more siasun robot&automation for automated fulfillment network penetration? Because it can help us deliver quickly, deliver cost-effectively, and help the fulfillment team create a safer work environment. At least for our team, what we do is a very systematic and rhythmic work. Our team has also made many investments in this area. We believe that ai can be a very important part of our robot network. We have also just recruited highly skilled employees in the artificial robot organization, which we believe will be a core part of our future business development.

Q: Why are consumers inclined to accept products with low ASP? How is the development of low ASP categories currently, and what are our long-term global strategy for consumer goods?

Yes, in Q3, our sales achieved rapid growth globally, and the significant difference on the consumer side compared to the previous quarters is that their price awareness has increased, which matches our prime activities. We have saved billions of dollars for prime members, leading to an accelerated prime member fee cost in this quarter. More and more discounts and deliveries are geared towards prime members, which is the most favorable pricing in the retail trade. These are the bullish signals we can see.

This has an impact on low ASP categories, and the growth of daily necessities category is very significant. We must have the ability to deliver goods quickly to achieve product sales. When we achieve this, our results can further help consumers build a stronger shopping basket. At the same time, we accept a short-term decline because we focus more on free cash flow, and we hope to further unlock some new elements of consumer spending.

It is not easy to provide low ASP products in the long term. Over the past few years, we have been continuously reducing service costs and bringing more product choices to customers. There has been further acceleration in interaction speed, and the same-day delivery network has been expanded. More importantly, it can help further reduce shipping costs to provide customers with a better shopping experience. At the same time, we still have more opportunities to further expand this business scope.

Q: What is the reason for the slowdown in the growth rate of third-party online shopping business in the third quarter?

Currently, 60% of paid products in Q3 come from third-party sellers, which has risen from 59% in the past two years. The impact we currently see is that buyers' demand for daily necessities is very evident, and the order volume is growing rapidly. Daily necessities tend to sell more of our self-operated products rather than third-party sellers' products.

Q: The company has made significant progress in artificial intelligence. How to use these basic data? What are the development trends of Alexa in the next period? How can it help further increase its revenue growth?

We do have a very wide range of Alexa devices, including in everyone's homes, offices, cars, hotels, and we have deployed many products worldwide, with hundreds of millions of active endpoints. We hope it can become the best personal assistant globally. At that time, everyone thought this idea was too crazy, but if you look at the development of generative artificial intelligence in the past few years, you will find that things that were initially thought to be impossible really happened. We have a very strong footprint in business development, and we believe that if we can build the core system of Alexa well, then we will have the opportunity to become the leader in this field for the next generation of basic models.

Currently, most applications, especially generative artificial intelligence applications, can help us make further progress in cost reduction and productivity improvement. At the same time, we can see more and more applications that can influence customer experience. We use a large amount of data for summarization and help with answering questions, but they still need further optimization so far. I think for the next generation development of these systems, what we need to do is not just answer questions, summarize indexes, and aggregate data, but more importantly, take action, which Alexa does very well.

Q: Is the cloud business facing service capacity limitations? Can NVIDIA chips help further drive sales growth?

Our immediate demand exceeds our supply capacity. In fact, so far, basically every company can see that their capacity is lower than their demand, mainly due to chips. Companies need more chip supply. We are currently achieving rapid business growth, and in the field of artificial intelligence, the business volume is already quite large. We are currently in the early stages, but we believe there will be further improvements in the future.

We have a deep partnership with NVIDIA, basically being one of the first to use their latest products. The partnership we have with NVIDIA is long-term. And for customers, as they continue to expand their implementation layers, they are increasingly aware that this can lead to a significant increase in costs. This is why we are now developing custom chips for training inference. The Trianium 2 will be launched in the next few weeks, from a cost-effective perspective, this product is definitely very attractive. Many of our customers have expressed interest, and we have already told our production partners to expect many more orders, much higher than our expectations. The main reason for this is that we see huge market demand, and we also need more capacity and supply to meet market demand. I think it is also a very good development opportunity for the AWS business and a very significant opportunity for customers.

Q: Is there competition in traditional retail business compared to fulfillment centers, distribution centers, and other traditional retailers? What are our advantages?

Competition is positive and healthy, benefiting both consumers and businesses. But the entire retail sector is a large segmented market, where we only hold 1% of the global retail market, with 80-85% market share existing in offline entities. This ratio is likely to change in the future, presenting opportunities for both us and competitors, with no one company dominating the situation.

We have a wide range of products to choose from, at lower prices, with very good sales partners that can enhance consumer's daily shopping experience. More importantly, we have fast fulfillment and delivery speed. Based on the test analysis data we have seen so far, we can ensure that customers receive goods quickly. The faster the delivery speed, the higher the shopping frequency. We focus on customer-oriented values, which can drive business development, establish strong trust between buyers and sellers, and further enhance business development.

Editor / jayden