Key Points
Shares of Amazon.com (NASDAQ: AMZN) and Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) climbed on Monday, following bullish developments in the cloud industry.
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Investors cheer Amazon’s pricing power
Reports of price increases at Amazon Web Services (AWS) were taken as an indication of strong demand for cloud computing services. Amazon is reportedly raising prices by up to 20% for access to advanced graphics processing units (GPUs) designed by the likes of Nvidia.
AWS is one of Amazon’s highest-margin business lines and a key driver of its earnings growth. Price hikes should help Amazon offset the surging costs of memory chips and other artificial intelligence (AI) infrastructure, thereby preserving its enviable profit margins.
Price increases also suggest that demand for AI and other cloud workloads could be even higher than investors expect.
Alphabet makes its debut
Amazon’s gains also bode well for Alphabet. Google Cloud has been growing even faster than AWS in recent quarters, albeit from a smaller revenue base. If AWS is enjoying strong demand for its cloud services, Google likely is as well.
Alphabet’s stock price might also have received a boost from its inclusion in the Dow Jones Industrial Average. The tech giant replaced Verizon in the venerable stock index on Monday.
Although ETFs and mutual funds that track the Dow aren’t as popular as those that track the S&P 500 or Nasdaq-100 indexes, Alphabet’s inclusion in the DJIA likely spurred some buying that bolstered its stock price.
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Joe Tenebruso has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, and Nvidia. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
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