Veteran stock trader's latest Amazon move turns heads
The introduction of a Chinese AI app rippled through the entire tech market and hit AI-chip leader Nvidia particularly hard.
The DeepSeek app’s developer claims that its flagship AI model, R1, performs almost as well as costly models like OpenAI but at far less cost.
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OpenAI Chief Executive Sam Altman said on X that the new model was impressive, “particularly around what they’re able to deliver for the price.”
The Chinese AI model uses the Nvidia H800, a chip that’s far less expensive than the processors major U.S. builders of large language models are using.
The introduction of DeepSeek has caused a stock slump among major AI players, led by chipmaker Nvidia (NVDA) , since it could severely crimp demand for Nvidia’s pricey AI chips, which are crucial to its business.
Related: Fund manager who predicted Nvidia’s selloff makes a bold move
It might also make investors question whether major tech companies — like Microsoft, Amazon, Alphabet and Meta — should continue with their massive AI-spending plans, which are expected to total $300 billion in 2025 alone.
The Nasdaq Composite sank 3% on Jan. 27 following the DeepSeek revelation, and Nvidia dropped 17%.
But Amazon? It barely budged. The stock actually gained 0.24% during Monday’s brutal selloff.
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Veteran trader is selling Amazon shares
Amazon (AMZN) rallied 44% in 2024, driven largely by the growth of Amazon Web Services, its cloud-computing division.
The company is building chips that it sees as a cheaper alternative to Nvidia’s equipment.
AWS’s operating income for Q3 2024 was $10.4 billion, up about 50% from $7 billion in Q3 2023. The latest figure represented about 60% of Amazon’s total operating income of $17.4 billion for the quarter.
Related: Analysts revamp Amazon stock price target after AWS AI update
Amazon is scheduled to report Q4 2024 earnings on Feb. 6.
Wall Street veteran Chris Versace this week pared the Amazon holding in TheStreet Pro’s portfolio by 9% at $238.22 a share. Amazon now accounts for roughly 4% of the portfolio.
“With the short-term S&P Oscillator pointing to an overbought market, we are going to ring the register and lock in some pronounced gains,” he explained. Since the bottom in the market in August 2024, Amazon shares are up 50%.
Versace’s career began in the 1990s. He first bought Amazon shares for the portfolio in 2018 and added to the position six times, with the most recent purchase in August 2024.
His average gain on Amazon shares is about 148%.
Even after the sales Versace continues optimistic about Amazon stock.
“It is making strides not only AWS with AI adoption but also its advertising business,” he told TheStreet. “The advertising business is a high margin one for them, and they are expanding it past Prime Video and the shopping site.”
Analysts bullish on Amazon shares after DeepSeek
Wedbush analyst Daniel Ives reiterates confidence in AI stocks, describing the selloff as a “golden buying opportunity.”
“Nothing with DeepSeek makes us believe anything different,” said Ives in a research note.
“These are just the opportunities to own the Nvidia, Microsoft, Alphabet, Palantir, Salesforce, Amazon and broader tech ecosystem that is under heavy pressure,” he added.
Wedbush raised its price target on Amazon to $280 from $260 with an outperform rating before its Q4 earnings report.
“We are constructive on the setup ahead of the report given a strong holiday in the US and continued efficiency gains within the core retail business that should drive upside to margin expectations despite near-term [foreign-exchange] headwinds.” the firm said.
Wedbush says Amazon is positioned to outperform expectations again in 2025 and “investors are overly conservative on 2025 margin potential.”
Oppenheimer analysts also view the DeepSeek news as a positive signal for Amazon, thefly.com reported.
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It is “very positive” for the overall AI ecosystem because DeepSeek is charging less than 1/20th of what OpenAI is, and this could lower inferencing costs, according to the analyst.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
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