3 Sectors Amazon May Invest In Soon

The Dean of Valuation, Aswath Damodaran, states that a good company always has a narrative behind its business model. Dr. Damodaran describes Amazon as a “disruption platform, [that] target[s] any large business where the status quo is inefficient.”

Amazon’s secret sauce for entering and disrupting inefficient markets is composed of three key ingredients: endless amounts of cash (mostly provided by AWS’ hefty profits), massive economies of scale (which makes any disruption easier to distribute), and the capability to analyze large sets of data.

If we assume the company will retain these three key “ingredients” as the central pillar of its business, here are three sectors that Amazon may try to disrupt in the future.

(Read more from the Amazon Maven: Amazon Stock: Should You Buy It in September 2022?)

1. Electric Vehicles and Transportation

If Apple can compete with Tesla, why wouldn’t Amazon try to too?

Yes, it is unlikely the e-commerce behemoth would run a hypothetical automotive venture under its main brand since the company currently owns nearly 18% of Rivian’s equity. However, controlling such a significant stake in the electric automaker allows Amazon to access the expertise needed to enhance its offensive on the electric mobility industry.

How serious is Rivian, anyway? Rivian may not seem a threatening player today, especially considering that the giant traditional automakers are slowly moving to electric vehicles. However, a CNBC report argues that an Amazon-Rivian partnership might change the state of the playing field.

“When Amazon invested in them [Rivian], but more importantly, put a commitment to buy all of those vehicles from them, they changed the market dynamic around that company,” said Mike Ramsey, an auto and smart mobility analyst at Gartner.

For the record, if Amazon ever enters the electric vehicle space, I, personally, would not bet on Amazon venturing into the passenger vehicle industry right away. Amazon would probably be more interested in electric trucks (such as the ones Rivian is set to deliver by 2024). The electric-powered transportation space is less competitive. Gaining a foothold here would also help Amazon partially offset its own logistics costs.

2. Education

There are three main factors that led to my thinking that Amazon may move into the education industry:

1. Amazon has become a data-driven company. Technology has changed so much about society, but our teaching methods are essentially the same as those used a century ago. Amazon could disrupt the education industry by creating data-backed algorithms that are optimized for each student’s individualized pace of learning.
2. Amazon has distribution channels. Companies that wish to disrupt education using data often face hurdles in escalating the scale of their services. Since Amazon has strong distribution channels, it could be easier for the company to overcome this obstacle.
3. Amazon needs it. The Amazon Maven previously discussed how the Seattle-based behemoth needs to hire new professionals every year in order to stay growing. By educating its own tech professionals, for example, Amazon could reduce its headhunting costs. Plus, if students knew that studying at Amazon’s schools would help them land a lucrative job at AWS, they’d have extra incentive to enroll.

3. Social Media

Does it seem impossible that Amazon would try to compete with Meta and ByteDance? Well, not only is it possible, but the company has already tried: Amazon launched its own social media platform, called Spark, in 2017. It allowed Prime members to post pictures of products they bought, but the service was terminated in 2019.

But Amazon still possesses a successful social platform: the live streaming website Twitch, which had 140 million monthly active users in 2022. Since Bezos’ behemoth is aiming to also become an advertising titan, the company could enhance its investments in the sector in order to gain a greater market share in the advertising industry.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Amazon Maven)