Amazon (AMZN) Stock Analysis: 8.1% Trade Truce Surge — AWS + China Exposure Makes AMZN the Biggest Tariff Winner
Amazon really took the lead on May 5 with a surge of 8.1% as the news of the 90-day US-China tariff truce broke - that was the biggest...
Quick overview
- Amazon's stock surged 8.1% on May 5 following the announcement of a 90-day US-China tariff truce, marking the largest single session gain among major tech stocks.
- The trade truce is particularly beneficial for Amazon, as approximately 30% of its goods sold come from China, and Chinese advertisers account for 14% of its ad revenue.
- Amazon's ad business, which grew to a $70 billion run rate, stands to gain from increased spending by Chinese advertisers now that tariff uncertainties have eased.
- Analysts predict Amazon could reach a valuation of $3 trillion by 2026, with stock targets between $300 and $320, reflecting a potential rise of 10-18% from pre-truce levels.
Amazon really took the lead on May 5 with a surge of 8.1% as the news of the 90-day US-China tariff truce broke – that was the biggest single session move of all the big tech stocks. By the close of play on May 4, AMZN had ended up at $273.55 after a pretty convincing fibonacci breakout above $264; and the trade truce has now sent it well clear of that level, for a significant gain. Amazon led the charge because it has a unique problem – no other one of the Magnificent Seven has anything like the same level of exposure to the Chinese markets, across as many revenue streams as Amazon does.
Why Amazon’s the top beneficiary of the trade truce
Raymond James reckoned that around 30% of all goods sold on Amazon’s website come from China – whilst chinese advertisers make up about 14% of the total spend on Amazon ads. And that’s a double whammy. Tariffs that had been clobbering Chinese goods by as much as 145% were a nightmare for Amazon – but the trade truce reducing tariffs to 30% is a godsend. Chinese sellers on Amazon, who are a major part of the marketplace, had been holding back on inventory and advertising because of the uncertainty. And with the truce now in place, they can start to feel a bit more confident, which is great news for Amazon’s business.
One of the key things that has been hit by the uncertainty is Amazon’s ad business – which grew 24% to a $70 billion run rate in the last 12 months of Q1 – and any stabilisation of spending from Chinese advertisers is a big deal for that business – because it will help support Amazon’s Q2 guidance.
On the Q1 earnings call, Andy Jassy said that AWS had seen its growth accelerate by 480 basis points to 28% – and that was driven by a combination of the core services and AI, with a very strong connection between spend on AI and cloud growth. But you might ask – what about the trade truce? Well, at first glance it might seem like it doesn’t affect AWS – but what it does is remove the uncertainty that had been weighing down the price the market is willing to pay for those earnings – and that’s a big deal.
One other thing that caught our eye on the call was a comment from Jassy about the capex that Amazon has planned for 2026. He said that a big chunk of that was going to be spent on infrastructure that will be installed in future years – with the added bonus that Amazon has already got customer commitments for a lot of it – and the datacentres and servers they are investing in have useful lives of 30 to 6 years respectively. That’s a game-changer for the $200 billion capex concern – this isn’t Amazon speculating, it’s building infrastructure that will be generating cash for decades.
AMZN Technical Analysis: A clear path for the breakout
The daily chart shows AMZN breaking out above the 3.618 fibonacci extension at $277.69 after it held onto its ascending channel from the 1.618 base at $234 all the way through. The higher highs and lows are all still intact. And on the RSI – we’re seeing some pretty elevated readings – but this looks to be a momentum breakout rather than a sign of exhaustion.
- The resistance levels are: $277.71 (which is the 3.618 Fib) all the way out to $285.97 (the 4.0 Fib extension – which is our first target).
- Support is still at $264-$268 (a fibonacci cluster / ascending trendline) – and we’ve also got $255 (a stop zone) and $242 (a 2.272 Fib base) to fall back on.
The trade truce has now cleared $277 – and the next level to watch is $285.97. We’ve still got our ascending channel intact – and on the technical indicators – we’re seeing 26 on CoinCodex flip to bullish as of May 4 – so the path of least resistance is definitely to the upside.
Trade set up: Long on any pullback to $264-$268. Stop below $255. Target $286-$294.
The Motley Fool is predicting that Amazon will be joining the $3 trillion club by 2026 – and at around $285-$290 – that’s when they are going to hit that milestone. And if we look at the analyst consensus – they are expecting $300-$320 – a rise of 10-18% from pre-truce levels – and that’s now looking achievable before the Q2 earnings in late July.
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