Chamath Palihapitiya Defends His $1 Trillion Amazon Valuation

Social Capital's Chamath Palihapitiya said during the Ira Sohn conference on Wednesday that Amazon.com, Inc. AMZN's stock will be valued in the trillions of dollars. Speaking as a guest on CNBC's Squak Box on Thursday, Palihapitiya defended how he arrived at his uber-bullish thesis. Palihapitiya said that unlike other investment funds that value a stock on the near-term outlook, Palihapitiya "took a step back" and looked at macro economic factors that will play out over a 5 to 10 year period. Palihapitiya continued that there are 2 main reasons to support a bullish stance on Amazon. First, Amazon members, especially Prime members, have taken to the online platform to buy a large quantity of goods every day. He added that the number of Prime users continues to grow and is likely to skyrocket over the next 5 to 10 years. When asked if Amazon's seemingly endless investments in its retail business is hurting the company's profitability profile, Palihapitiya argued that Amazon's CEO Jeff Bezos is proving to make the right investments in the business. Rather than returning cash to shareholders, Bezos has taken the same money and invested it in business lines that lower the overall costs. Second, Palihapitiya suggested that the Amazon Web Service (AWS) business is not necessarily understood by investors. He stated that AWS is essentially an infrastructure that "everyone uses to build their company" and that it is a "utility that is similar to electricity." Palihapitiya pointed out that AWS has cut its prices on average once every 2 months since it was created around 10 years ago. At the same time, the service continues to add new features which essentially disrupts the entire sector.