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Amazons AI-Driven Growth Drives Seth Klarmans Largest Stock Pick
Seth Klarman, the value‑oriented billionaire who runs the Baupost Group, has made Amazon.com, Inc. (NASDAQ: AMZN) the single largest holding in his portfolio. The move, announced in early 2026, signals that even a conservative investor sees the company’s cloud‑based artificial‑intelligence (AI) business as a long‑term growth engine.
Klarman has built a reputation on buying companies trading at low multiples, but Amazon’s Amazon Web Services (AWS) unit dominates the AI market. AWS’s backlog sits at roughly $464 billion, including $138 billion from OpenAI and $100 billion from Anthropic, reflecting multi‑year, high‑value contracts that lock the company into the expanding demand for large‑scale inference and AI agents.
AWS contributes about 20 % of Amazon’s total revenue while generating roughly 60 % of operating income. In the first quarter of 2026, AWS revenue accelerated 28 % year‑over‑year, reaching an annualized run rate of $150–$155 billion. A report from Semianalysis notes that AWS is the only major cloud provider showing a consistent rise in operating margins, partly because of the high‑margin workloads from Anthropic’s Claude models running on AWS Bedrock.
Beyond the cloud, Amazon is investing heavily in custom silicon that powers its AI workloads. The company’s AI‑related revenue run rate now exceeds $15 billion annually, while the broader custom‑silicon business tops $20 billion. Products such as Graviton, Trainium 2/3, and Inferentia are used both internally and by external customers, and the AI chip backlog has reached $225 billion.
CEO Andy Jassy announced a 2026 capital‑expenditure plan of about $200 billion, with the majority directed to AWS. Amazon is also expanding its AI partnerships: it invested $50 billion in OpenAI and $4 billion in Anthropic, and has secured a $138 billion commitment from OpenAI for eight years.
In its Q1 2026 earnings release, Amazon reported operating income of $23.9 billion, a 30 % increase from the same period a year earlier, and an operating margin of 13.1 %. The results were driven by AWS’s 28 % revenue growth and record margins, offset by higher CapEx and AI‑related costs.
Artisan Value Fund, a long‑term investor that tracks Klarman’s holdings, highlighted Amazon in its Q1 2026 investor letter. The fund said it had added four new positions that quarter—Amazon, Universal Music Group, and IQVIA Holdings among them—at a time of heightened market volatility that it said created opportunities to upgrade portfolio quality.
The combination of a robust AI backlog, expanding margins, and a strategic focus on custom silicon positions Amazon as a key player in the AI ecosystem. For Klarman, the investment reflects confidence that the company’s cloud and AI businesses will continue to generate high‑margin growth long after the current AI boom.
Looking ahead, Amazon’s next earnings report will provide further insight into the pace of AI‑related revenue and the impact of its $200 billion CapEx plan. Investors will also watch how the company balances its high‑margin AWS segment with the lower‑margin retail and advertising businesses.
The company’s AI strategy, backed by significant capital investment and a growing backlog of high‑value contracts, remains a central factor in its valuation and a key reason for its prominence in Klarman’s portfolio.
Klarman has built a reputation on buying companies trading at low multiples, but Amazon’s Amazon Web Services (AWS) unit dominates the AI market. AWS’s backlog sits at roughly $464 billion, including $138 billion from OpenAI and $100 billion from Anthropic, reflecting multi‑year, high‑value contracts that lock the company into the expanding demand for large‑scale inference and AI agents.
AWS contributes about 20 % of Amazon’s total revenue while generating roughly 60 % of operating income. In the first quarter of 2026, AWS revenue accelerated 28 % year‑over‑year, reaching an annualized run rate of $150–$155 billion. A report from Semianalysis notes that AWS is the only major cloud provider showing a consistent rise in operating margins, partly because of the high‑margin workloads from Anthropic’s Claude models running on AWS Bedrock.
Beyond the cloud, Amazon is investing heavily in custom silicon that powers its AI workloads. The company’s AI‑related revenue run rate now exceeds $15 billion annually, while the broader custom‑silicon business tops $20 billion. Products such as Graviton, Trainium 2/3, and Inferentia are used both internally and by external customers, and the AI chip backlog has reached $225 billion.
CEO Andy Jassy announced a 2026 capital‑expenditure plan of about $200 billion, with the majority directed to AWS. Amazon is also expanding its AI partnerships: it invested $50 billion in OpenAI and $4 billion in Anthropic, and has secured a $138 billion commitment from OpenAI for eight years.
In its Q1 2026 earnings release, Amazon reported operating income of $23.9 billion, a 30 % increase from the same period a year earlier, and an operating margin of 13.1 %. The results were driven by AWS’s 28 % revenue growth and record margins, offset by higher CapEx and AI‑related costs.
Artisan Value Fund, a long‑term investor that tracks Klarman’s holdings, highlighted Amazon in its Q1 2026 investor letter. The fund said it had added four new positions that quarter—Amazon, Universal Music Group, and IQVIA Holdings among them—at a time of heightened market volatility that it said created opportunities to upgrade portfolio quality.
The combination of a robust AI backlog, expanding margins, and a strategic focus on custom silicon positions Amazon as a key player in the AI ecosystem. For Klarman, the investment reflects confidence that the company’s cloud and AI businesses will continue to generate high‑margin growth long after the current AI boom.
Looking ahead, Amazon’s next earnings report will provide further insight into the pace of AI‑related revenue and the impact of its $200 billion CapEx plan. Investors will also watch how the company balances its high‑margin AWS segment with the lower‑margin retail and advertising businesses.
The company’s AI strategy, backed by significant capital investment and a growing backlog of high‑value contracts, remains a central factor in its valuation and a key reason for its prominence in Klarman’s portfolio.
