Catalyst

Amazon (AMZN 0.57%) is best known for its e-commerce empire and its highly profitable cloud arm, Amazon Web Services (AWS). The tech giant’s shares have rallied over the last year, lifting the company’s market cap to more than $2.3 trillion as of this writing. That strength reflects solid execution across the business and optimism about the company’s growing role in artificial intelligence (AI). Yet one driver often takes the back seat to AWS: advertising.

Advertising is now a sizable, fast-growing revenue line that benefits from Amazon’s unmatched data, the shopping intent of visitors, and its expanding media footprint. Further, ad revenue accelerated again in Q2, and recent management commentary points to more opportunity ahead. Put simply, advertising is an important reason the long-term investment case remains compelling.

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Advertising momentum keeps building

Amazon’s advertising services revenue rose 23% year over year to about $15.7 billion in the second quarter of 2025 (22% growth excluding currency impacts). This followed 18% growth in the first quarter (19% excluding currency impacts), showing healthy acceleration as the year progresses. Drivers include more shopping activity, improved ad tools and measurement, the ongoing rollout of Prime Video ads, and connected-TV (CTV) partnerships that broaden where Amazon can serve ads. Notably, Amazon highlighted a June integration with Roku, with the partnership reaching an estimated 80 million U.S. households. The company’s push into CTV expands advertiser reach beyond retail search into high-engagement streaming, where advertisers are willing to pay more for ad spots.

Together with retail search, brand and display placements, and its demand-side platform (DSP), Amazon is deepening the ways it can match advertiser goals with shopper intent and authenticated audiences across its sprawling digital services. In other words, the company isn’t just selling placements; it is selling performance.

Why advertising is key to the bull case

Advertising represents high-margin revenue layered on top of Amazon’s massive retail and media ecosystem. While the company does not disclose ad margins, the economics are attractive and scale with traffic, selection, and relevance improvements.

Although management doesn’t provide specific commentary on its advertising margins, it often implies that they are key to the company’s profit growth story.

“Advertising remains an important contributor to profitability” in both its North America and international segments, said Amazon CFO Brian Olsavsky in the company’s most recent earnings call.

While Amazon does not break out operating income for advertising separately, the high-margin nature of the business is a meaningful tailwind for overall profitability in North America and internationally. AWS, of course, remains the largest profit center, generating $10.2 billion of operating income in the quarter, but advertising is an increasingly important profit contributor that diversifies and helps stabilize the overall business through cycles.

It’s also worth noting that Amazon’s capabilities in advertising are difficult for rivals to replicate, given the company’s scale. So it wouldn’t be surprising to see Amazon continue gaining market share in advertising for years to come.

But this part of Amazon’s business comes with risks. Ad budgets are cyclical, and privacy and regulatory changes can impact targeting and measurement. Additionally, competition from other large advertising platforms remains intense. Meanwhile, Amazon stock’s valuation already bakes in healthy growth across its businesses. With a market cap in excess of $2.3 trillion, trailing-12-month sales approaching $700 billion, and net income of $70.6 billion for the same period, shares trade at a premium that assumes steady execution. But advertising strengthens the case that Amazon can sustain double-digit top-line growth and rising profitability alongside AWS over time.

AWS may be the more important profit engine today, but advertising is a quiet force that is enhancing Amazon’s profit engine. The business benefits from Amazon’s data and distribution, adds higher-margin revenue to retail, and opens new monetization surfaces in streaming. For investors evaluating Amazon’s long-term return profile, understanding the momentum and durability of advertising — not just cloud — is key.

Despite a difficult start to the year, Tesla (TSLA 2.27%) stock is now up by double digits in 2025. With a market cap of $1.3 trillion, however, many investors are wondering how much additional growth potential shares offer. Some analysts think that Tesla can become a $2 trillion business by the end of 2026. But there are some key risks to be aware of before loading up on Tesla stock.

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Tesla trades at a steep premium to Rivian and Lucid Group

The biggest risk facing Tesla right now is the stock’s premium valuation. Shares trade at a price-to-sales ratio of around 16. Other electric car stocks like Lucid Group and Rivian have stocks that trade between 3 and 7 times sales. According to this metric, Tesla trades at a 100% to 400% premium over the competition. That’s the case even though competitors like Rivian and Lucid have market caps under $20 billion, theoretically providing much longer growth runways versus Tesla’s $1.3 trillion valuation.

Of course, paying a high premium isn’t a problem if the company in question is growing fast enough to justify such a valuation. A company that trades at 16 times trailing sales, for instance, would trade at just 8 times sales one year from now if revenues grew by 100%. That is far from the case for Tesla, however.

This year, analysts expect Tesla’s sales to fall by around 5%. For comparison, Lucid and Rivian are expected to see sales grow by 61% and 6%, respectively. Next year, analysts do expect positive growth to return for Tesla, with 20% sales growth expected. But Lucid and Rivian are still expected to see higher sales growth than Tesla, with 93% and 33% expected sales growth, respectively.

So at least on a price-to-sales basis, Tesla shares trade at a hefty premium to both Lucid and Rivian even though its expected sales growth both this year and next year are below that of both companies. What’s up with that?

To be sure, competitors like Rivian and Lucid don’t have the scale or brand name recognition that Tesla does. But as mentioned, both also have arguably much more room to grow long term. The main differentiator is current or near-term growth, but long term growth potential in a new and exciting — but possibly overhyped — business segment: robotaxis.

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Robotaxis could become a $1 trillion business for Tesla

Analysts are very bullish on Tesla’s robotaxi dreams. The company launched a pilot version of its autonomous taxi service this summer in Austin, Texas. Additional cities like San Francisco may soon be on the way. Tesla CEO Elon Musk optimistically believes there could be 1 million or more Tesla robotaxi’s roaming the streets of America by the end of 2026.

How big could this business be for Tesla? Dan Ives, an analyst at Wedbush Securities, believes it could soon add $1 trillion to Tesla’s market cap. Cathie Wood, a high-profile, outspoken Tesla investor, believes the overall market could eventually be worth $10 trillion. Tesla is uniquely positioned to take on this market, with its large production facilities, multi-year investments in autonomous driving, and its sheer access to capital.

Even if Tesla’s robotaxi service stumbles in its first year — which many skeptics predict — the growth opportunity is clearly immense. And as mentioned, Tesla is uniquely capable of taking a leading role in this new industry. But as Reuters recently pointed out, “getting from dozens to millions of self-driving cars won’t be easy.” This should be viewed as a multi-decade opportunity for Tesla, not a near-term reality. Tesla’s bumpy rollout in Austin should be a testament to that fact.

Tesla’s stock price is reasonable for long-term investors who believe in the company’s robotaxi aspirations. But the premium is far too high for a simple EV manufacturer with smaller business segments in energy storage and generation. Tesla remains an exciting company to watch, but investors must be bullish on robotaxis over the long haul to justify a position.

An estimated 650 companies from 60 countries have gathered at the China International Supply Chain Expo in Beijing.

Nvidia CEO Jensen Huang has called China’s open-source artificial intelligence a “catalyst for global progress” and says it is “revolutionising” supply chains.

In a speech during Wednesday’s opening ceremony of the China International Supply Chain Expo in Beijing, Huang – whose firm last week became the first to touch $4 trillion in market value – hailed China’s role in pioneering AI, describing Chinese AI startup DeepSeek as “giving every country and industry a chance to join the AI revolution”.

Huang made the comments a day after Nvidia announced it will resume sales of its H20 AI chips to China after the United States government pledged to remove licensing restrictions that had halted exports.

“AI is transforming every industry from scientific research and healthcare to energy, transportation and logistics,” said Huang, who also praised China’s “super-fast” innovation, powered by its “researchers, developers and entrepreneurs”.

The California-based company produces some of the world’s most advanced semiconductors but cannot ship its most cutting-edge chips to China due to Washington’s concerns that Beijing could use them to enhance its military capabilities.

Nvidia developed the H20 – a less powerful version of its AI processing units – specifically for export to China. However, that plan stalled when US President Donald Trump’s administration tightened export licensing requirements in April.

“Huang says he’s now free to sell to the Chinese market thanks to negotiations with China on trade,” Al Jazeera’s Katrina Yu said, reporting from Beijing. “The Trump administration has confirmed that in exchange for rare earths, it will allow the chip to now be sold into China.”

“The US government has assured Nvidia that licenses will be granted, and Nvidia hopes to start deliveries soon,” the company said in a statement on Tuesday, adding that it was “filing applications to sell the Nvidia H20 GPU again”.

Nvidia has also announced it is developing a new chip for Chinese clients called the RTX Pro GPU, which would also be compliant with US export restrictions.

The announcement from Nvidia boosted tech firm stocks around the world with Wall Street’s Nasdaq Composite index rising to another record high and stocks in Hong Kong also rallying.

The tightened US export curbs were imposed as China’s economy wavers. Domestic consumers are reluctant to spend, and a prolonged property sector crisis is weighing on growth.

President Xi Jinping has called for greater self-reliance in the face of increasing external uncertainty.

“China is really fashioning itself as a champion for free trade and this global supply chain expo is about positioning China as a crucial part of that global logistic infrastructure,” Yu said. “Beijing is trying to make a statement, and that statement is unlike the Trump administration would have the world believe – China is not replaceable” as evidenced by the roughly 650 companies from 60 countries represented at the expo.