AMZN Stock Extends Gains Overnight On Anthropic Boost — But 'Circular Deal' Fears Are Keeping Retail On Edge

• AMZN stock jumped over 2% in after-hours following the announcement.
• Some traders are now eyeing Amazon’s Q1 report next week as the major catalyst.
• Stocktwits sentiment for AMZN remained unchanged at ‘bullish.’

Amazon.com Inc. is doubling down on its partnership with Anthropic, committing up to $25 billion under an arrangement that includes purchasing each other’s services. The structure has renewed concerns around so-called circular deals, with some retail traders questioning how much real upside the agreement delivers.

Even though Amazon’s shares gained over 2% in the after-market session on Monday and rose further overnight, following the joint announcement, the retail sentiment reading for AMZN did not budge. 

Retail Traders Proceed With Caution

On Stocktwits, the sentiment remained ‘bullish,’ unchanged since last Friday. The sentiment for Anthropic was ‘bearish.’ Retail traders and analysts broadly sounded upbeat, but certain pockets of the market sounded skeptical.

“$AMZN almost a $3T company moving like this on a $30B investment,” said a user, one user said, pointing to what some see as outsized market reactions to AI-related updates. 

Another wrote: “$AMZN so last month Amazon dropped from $240 to $190 because it was investing in AI, and today it rises after hours because it's investing more in AI? and I am supposed to believe the market is fair and they don't make s*** up as they go?”

On the other hand, certain traders argued that the deal “locks in” future revenue. “$AMZN they just locked in a $100B in AWS revs and 5 GW high margin Tranium over ten years. $5B capex now and rest later is well worth guaranteed profitable sales,” said a user. 

Amazon Deepens Anthropic Tie-Up

Amazon was one of Anthropic’s early backers, having already invested upwards of $8 billion into the AI company. Most of Anthropic’s services and computing resources are hosted on servers operated by Amazon Web Services. With a sharp rise in sales and a battery of new AI launches, Anthropic is seen threatening OpenAI’s pole position as the two firms prepare to go public later this year.

Under the latest deal, Amazon will invest $5 billion in Anthropic upfront and up to an additional $20 billion in the future, tied to certain commercial milestones. Anthropic has committed to spending more than $100 billion on AWS technologies over the next 10 years, including current and future generations of Trainium, Amazon’s custom AI chips. 

AWS Cloud Math, Chip Boost

Corey Quinn, a cloud economics expert at Duckbill, questioned on X how much of Amazon’s investment is being made in the form of AWS credits – a point that has repeatedly surfaced in discussions around AWS, with some arguing that credit-based, service-for-service arrangements are a key driver of AWS growth.

“Amazon has compute, so Anthropic has to pay for their compute and let them invest in the company,” CNBC’s Jim Cramer said on X. “Circular deals are meant to puff up earnings. No earnings are being puffed here, believe me. However, we are seeing a solid return on the data center now. Jensen was right all along.”

A circular deal is when companies fund or pay each other in ways that loop revenue back (such as investing in a partner that then spends it on your services), inflating growth metrics without real independent demand.

However, the Anthropic deal is a strong fit for Amazon’s chips business. “Trainium is the next custom AI chip to catch fire as demand for AI compute knows no limit,” said Daniel Newman, CEO of The Futurum Group.

Amazon recently revealed that the chip business, which includes Graviton processors, Trainium AI chips, and Nitro networking cards, ​has an ⁠annualized revenue run-rate of over $20 billion.

In another bullish signal, Cathie Wood’s ARK Space Exploration & Innovation ETF (ARKK) increased its Amazon position with the purchase of an additional $874,955 worth of shares on Monday.

Traders are now keeping a close eye on Amazon’s quarterly report due on April 29. As of the last close, Amazon’s shares are up 7.6% year to date.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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