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Amazon joins the race for AI supremacy

This week, Amazon joins the AI race, Costco beats analyst expectations, and EV maker NIO releases a new smartphone. It’s time for The Weekly Scoop!

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Amazon invests $4B into AI but sees stock fall 5% 📉

The race for AI supremacy: Amazon started the week by announcing it’ll invest a whopping $4bn into Anthropic, an AI startup behind Claude 2, a ChatGPT-like language model. This move pits Amazon against tech giants like Google, Microsoft, and Meta in the race for AI supremacy. Despite the news, Amazon's shares remain on the decline this week, and there’s a clear reason why…

  • Monopolistic behaviour: The US government is suing Amazon for “exclusionary conduct” that keeps existing competitors from growing and new competitors from emerging. Apparently, Amazon's actions prevent rivals from lowering prices, overcharges sellers, and stifles innovation. 

  • Fighting back: Amazon’s SVP of Public Policy, David Zapolsky, said the allegations are not supported by facts. If the lawsuit goes ahead, he claims Amazon will have fewer products to sell, prices will rise, and deliveries will be slower; all of which will affect small businesses. Have Amazon shares hit a low point? Time will tell.

Stock analyst rating stating strong buy

*Ratings are provided by analysts at Zacks, a leading investment research firm

Costco climbs 3% as it outperforms analyst expectations 🛒

A stock in the green: On Tuesday, Costco beat analyst expectations making it one of the few stocks to end up in the green, after what’s been a tough week for the stock market.

  • A billion dollar boost: Costco outperformed analyst expectations by over $1bn in its fiscal fourth quarter. This comes at a time when rival store Target is closing 9 of its stores due to inventory theft. It seems Costco’s membership subscription helps deter thieves.

  • Membership’s on the up: With 125 million members and subscription fees ranging from £15 to £75 per year, we don’t need to do the maths to tell you it’s a very profitable company. On the earnings call, investors wanted to hear Costco were upping subscription prices, and although this isn’t yet happening, CFO Richard Galanti said “it’s not a question of if, but when”.

Stock analyst rating stating strong buy

*Ratings are provided by analysts at Zacks, a leading investment research firm

NIO shares fall 6% as it releases a new smartphone 📱

New phone, who dis: Last week, NIO released an Android smartphone. Investors are wary given how competitive the smartphone industry is; but could this be a smart long-term play for NIO?

  • Cars are becoming smarter: Tablets on dashboards, doors that dance, and cars that drive themselves - we’re living in a time where people want cars to be smarter. NIO CEO William Li believes making smartphones even more compatible with cars is one way to achieve this and says he expects at least half of NIO customers to buy their new device.

  • A new market: Avid readers of The Weekly Scoop will know we covered NIO’s monumental cash problem in last week’s newsletter. The EV company may have taken on an extra $1bn in debt, but it’s hoping it can make money through this new market.

Stock analyst rating saying hold

*Ratings are provided by analysts at Zacks, a leading investment research firm

What have we learned this week? 🤓

  • Governments are market movers: Regardless of investor sentiment around Amazon’s market dominance, it’s the US Government who have the final say here. The lawsuit has tarnished a big week for the ecom giant, spooked investors and brought share price down in the process.

  • Costco’s business model reduces theft: Target has closed 9 stores due to inventory theft and retail crime. This is another advantage Costco has over its competitors with its unique business model.

  • New revenue streams don’t always make for happy investors: NIO is having to explore additional ways to make money, as their primary product isn't yet profitable. Whilst it's exciting, it's caused investors to worry.

Stocks we're watching 👀

  • Starbucks: Starbucks is spending $450m on a new bar setup called Siren System that will shave 2 seconds off the time it takes to make a coffee. If implemented across every Starbucks store globally, it could add around $1bn in sales per year. 

  • Amazon: Amongst all the AI and legal headlines this week, the news that Prime Video will be introducing ads slipped under the radar. Next year, subscribers will need to pay $2.99 (£2.44) a month to go ad free. Amazon will be hoping it can replicate Netflix’s success with the introduction of ads, another valuable revenue stream. 

  • Microsoft: The acquisition of Activision Blizzard is edging closer after regulatory approval and it could help cement Microsoft’s stronghold on the cloud gaming market.

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*Figures and ratings correct as of September 28th 2023.

Past performance does not guarantee future results. Capital at risk when investing. This content is for educational purposes only. Shares does not provide investment advice. If you are unsure about anything, please seek advice from an authorised financial advisor.

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