Amazon enters US$3 trillion club as Wall Street opens higher on Middle East deal hopes

[BENGALURU] Wall Street’s main indices opened higher on Monday (Aug 3) as signs of de-escalating tensions in the Middle East dragged down crude prices, while investors prepared for another week packed with earnings and economic data.

US President Donald Trump on Sunday said talks with Iran to reopen the Strait of Hormuz would take place sometime on Monday, though Iran contradicted him.

Brent crude prices slid over 5.5 per cent, while the yield on the two-year Treasury note dipped 3.9 basis points.

Most mega-cap and growth stocks rose in early trading. Amazon touched a US$3 trillion market capitalisation for the first time, joining a handful of Wall Street giants at the top as a wave of renewed artificial intelligence optimism lifted technology stocks to new highs.

The e-commerce and cloud-computing company’s shares rose as much as 5.3 per cent in early US trade, adding to the raucous rally last week following second-quarter earnings that showed accelerating cloud-computing revenue.

Amazon joins Nvidia, Alphabet, Microsoft and Apple as the only companies that have reached that size.

The Dow Jones Industrial Average increased 0.52 per cent or 274 points at the open to 52,759.06. The S&P 500 rose 0.2 per cent or 15.1 points to 7,504.78,​ and the Nasdaq Composite gained 0.31 per cent or 78.8 points to 25,452.663 at the opening bell.

Amazon had been mired in a sell-off for much of the last three months as investors soured on shares of companies that had committed to spending billion of dollars on AI. Its stock sank nearly 18 per cent between its May 6 record and the three-month low it hit last month.

Those fears were eased last week after the firm reported that revenue for its Amazon Web Services unit last quarter jumped by the most since 2021.

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Shares surged more than 15 per cent in response, their biggest one-day jump in more than 14 years, to add nearly US$400 billion in value.

That has helped propel Amazon back into position as the best-performing Magnificent Seven stock this year. The gauge of its big tech peers has struggled this year, gaining only 2.1 per cent versus a 10 per cent gain for the broader S&P 500 Index.

While the rally has lifted Amazon’s valuation from the 17-year low it hit in late March, it is still far below where it has traded historically. At roughly 25 times forward earnings for the next 12 months, the stock is about 44 per cent cheaper than its average over the last decade.

It took Amazon just over two years to reach a market capitalisation of US$3 trillion after first hitting US$2 trillion in June 2024. That is faster than the more than six years between that milestone and when it first hit US$1 trillion in late 2018.

Wall Street remains overwhelmingly upbeat on Amazon’s long-term prospects, too. The average analyst price target calls for the stock to rise about 14 per cent over the year from where it currently trades, according to data compiled by Bloomberg. REUTERS, BLOOMBERG