Investors bet Amazon will fare better than its competitors in Trump’s trade war

Traders are pouring cash into Amazon, convinced it’s better built to survive President Trump’s trade war than its rivals. As new tariffs hit shelves across the US, retail giants are scrambling, but Wall Street is showing clear favoritism.

According to The Wall Street Journal, investors believe Amazon has more protection and more upside than Walmart, even though Walmart’s latest numbers show it’s performing well.

Walmart reported this Thursday that it would have to raise prices because tariffs are making goods more expensive. That warning came in the same breath as a solid earnings report showing a nearly 3% revenue increase from the same time last year and operating income that beat analysts’ expectations.

Still, investors shrugged off the warning. Walmart shares initially dropped that morning but quickly bounced back. They’re now up almost 2% since earnings came out. And in the past year, Walmart’s stock has surged 53%, crushing Amazon’s 12% gain in the same period.

Walmart says it can’t absorb tariff costs

Walmart’s current valuation is high, and that comes with risk. The company trades at 37 times its projected earnings for the next four quarters. That’s 40% above its own three-year average, based on data from FactSet. Amazon, by comparison, trades at 33 times forward earnings, making it the cheaper option on paper.

Doug McMillon, Walmart’s CEO, said Thursday during the earnings call, “More than two-thirds of the goods we sell in US stores come from the US.

But given the magnitude of the tariffs, even at the reduced levels announced this week, we aren’t able to absorb all the pressure given the reality of narrow retail margins.” Those tight margins are a problem across the industry, but Amazon has worked for years to build income streams that don’t depend on moving products across borders.

Walmart and Amazon had similar gross margins in the mid-20% range more than a decade ago, based on financial data tracked over time. While Walmart’s margins have held steady, Amazon’s have nearly doubled to 49% last year. 

That growth comes from bets Amazon made early on in cloud computing, AI, advertising, and satellite infrastructure—businesses that are unaffected by tariffs.

Walmart has made progress in those areas too. The company’s e-commerce sales hit $32.5 billion in the quarter ending in April, up 22% year-on-year. That now makes up 20% of its total revenue. 

Walmart also brings in money from ads and subscription services, much like Amazon. Zhihan Ma, an analyst at Bernstein, said, “Walmart is on a fundamentally improved earnings trajectory over the long term.”

Amazon expected to generate 2.5x Walmart’s income

But Amazon is far ahead. Both Amazon and Walmart are expected to generate $700 billion in revenue this year. Still, Amazon’s operating income is forecast to exceed $77 billion, which is two and a half times what Walmart is expected to earn. These estimates also take into account Amazon’s current spending on artificial intelligence and its satellite internet projects.

Those projects aren’t tied to consumer demand. So, even if tariffs put pressure on retail operations, Amazon’s other businesses provide a buffer against volatility. In contrast, Walmart’s new revenue streams—ads and e-commerce—are still tied to consumer buying habits and therefore, remain exposed to economic pressures.

That difference in structure is what has Wall Street leaning toward Amazon despite Walmart’s better recent stock performance. Walmart is still seen as one of the strongest traditional retailers and is clearly outperforming many competitors in a difficult market. But its dependence on goods that cross borders leaves it more vulnerable to Trump’s trade policies.

Amazon isn’t facing the same problem. Its diverse revenue model, growing gross margins, and scale in digital services make it a more attractive bet right now. While Walmart has become more than just a chain of big-box stores, it’s still playing catch-up. As it stands, Amazon is still winning the bigger game, and investors know it.

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