Jeff Bezos' Amazon Could See a Sizable Mark-to-Market Gain From Its Anthropic Stake When It Reports Earnings July 30, BofA Says

It's Amazon's (NASDAQ: AMZN) turn to step up to the earnings podium. The online retailer founded by Jeff Bezos is expected to show strong growth in its cloud computing business, Amazon Web Services, and is likely to increase its planned $200 billion capital expenditure budget as memory and storage products become more expensive.

I'm fully expecting Amazon to post solid second-quarter earnings on Thursday, July 30. But considering that investors seem to have the yips right now about spiraling data center costs, I expect the stock to drop due to capital expenditure growth and shrinking free cash flow. Yet there's one item that certainly will cause investors to smile: the company's massive gains from its stake in the start-up AI company Anthropic.

Amazon was an early investor in Anthropic, the company behind Claude, and put $13 billion in with the option to invest $20 billion more. That $13 billion stake is now worth much more, given that Anthropic is considering going public at a valuation of around $1 trillion. In a research note, Bank of America analysts point to Amazon's stake in Anthropic as a significant driver in its upcoming earnings report, generating a strong mark-to-market gain.

Let's see how Amazon's stake in Anthropic has grown, and what investors should be looking for in Amazon's Q2 update.

Amazon founder and executive chairman Jeff Bezos. Image source: Amazon.

Amazon is winning big with Anthropic

Amazon's investment in Anthropic includes an initial $8 billion investment in 2024, followed by another $5 billion in 2026. Published reports indicate that Amazon has 21% stake in the AI company.

However, at the end of the first quarter, Amazon valued its Anthropic stake at $74.2 billion -- $42.2 billion in convertible notes and $32 billion in nonvoting preferred stock. That would imply Anthropic had a value at that time of about $353.3 billion.

Last month, Anthropic filed a confidential IPO with the Securities and Exchange Commission that places Anthropic's value at $965 billion. That would push the value of Amazon's 21% stake to $202.6 billion.

Putting Amazon's gains into perspective

In the first quarter, Amazon reported net income of $30.25 billion -- a solid number, with much of that coming from its fast-growing Amazon Web Services. But it could be looking at a much larger gain -- on paper -- in this quarter just from its Anthropic stake, which appears set to increase by $128.4 billion in a single quarter.

That would certainly take the sting out of any dip in Amazon's stock price post-earnings. Big tech stocks have been hammered so far this week on fears of overspending on data centers and AI infrastructure, with Alphabet stock dropping 6% post-earnings after it raised its capex spending from $185 billion to $200 billion. Tesla fell even further after reporting a negative free cash flow of $1.1 billion for the quarter.

Amazon may suffer the same fate when it reports earnings. But investors who focus only on capex will miss the bigger picture. Anthropic's rapid growth is creating tremendous value for Amazon, and in the July 30 earnings report, investors may learn that its stake in the AI start-up is one of its most valuable assets.

Bank of America is an advertising partner of Motley Fool Money. Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Tesla. The Motley Fool has a disclosure policy.