By Jack Hough

Amazon.com is making a ruthless push for Christmas market share -- and a Rufus push. Its shopping bot is quickly gaining users and spurring sales.

"What does my wife want for Christmas?" I asked him. (I don't want to misgender a large language model here, but Rufus is named for a male Corgi who started with the company in 1996.) He asked about my wife's interests and personality, and my budget. "I don't want to answer that stuff," I wrote. "Just give me ideas." Apparently she wants skin cream, candles, cheap jewelry, expensive pajamas, aromatherapy shower pods, and a pillow that does heated shiatsu massage. Rufus can have them gift-bagged and at my door in less than a day.

I'll think it over. Honestly, it probably wouldn't be my worst holiday showing. And before you call me lazy, please remember that I'd be putting the full might of Amazon's recent logistics and artificial-intelligence spending to work. That's a 12-figure act of affection.

Amazon is already winning the holidays, and the reasons go well beyond Rufus. The Everything Store recently shortened its fastest delivery option in select cities to just three hours. The number of rural communities that can get same-day and one-day shipments has jumped by 60% in four months. A yearly J.P. Morgan analysis of gift items finds that Amazon has a much larger assortment than Walmart or Target, and that those two are about 10% and 11% more expensive, respectively. A separate survey from Profitero, a retail performance tracker, finds that Amazon comes in 14% cheaper than the online competition.

That puts the sales outlook for retail, e-commerce, and Amazon at good, better, and best, respectively. Mastercard, Bain, the National Retail Federation, and other forecasters point to 3% to 4% Christmastime growth for retailers. JPM reckons e-commerce spending will increase by 7%, taking its share of retail to 24.8%, up half a point from last year.

Amazon already controls 46% of e-commerce, and JPM expects its retail revenue to outgrow the industry again, rising 9.2% in the fourth quarter. Revenue for Amazon isn't quite the same as product sales, because the company makes much of its money charging logistics fees to third-party sellers, but the gross market value of goods it sells or handles is easily outrunning the industry, too.

The most eye-catching thing about Amazon isn't how much it's selling, however, but how much it's buying. First, consider Target, which is playing from behind in e-commerce and trying to arrest a five-year, 45% stock decline, will put an estimated $4 billion this year into capital expenditures. This includes store remodelings, new warehouses and sorting centers, and automation. There isn't much financial firepower left without borrowing. Target's free cash flow, or operating cash flow minus capex, is pegged at $2.5 billion this year.

Walmart is in a different league than Target, of course. It's also further ahead in e-commerce; earlier this year, it announced its first online profit. Capex for Walmart this year is estimated at $24.3 billion, leaving about $15 billion in free cash flow. This is more than double what it was spending five years ago. This year, Walmart added its own app-only shopping bot, Sparky, named not for a company dog but for its spark logo. I downloaded the app and asked what my wife wants for Christmas: cheap jewelry and a soapy gift box with Rudolph socks. I asked ChatGPT, too, and it spit out a whole seminar on how to listen better and "consider her love language," without so much as a one-click discounted bath bomb in sight. I'm leaning toward Rufus for shopping and ChatGPT for marriage coaching.

As recently as 2019, Amazon was putting only a smidgen more into capex than Walmart. Now it's spending five times as much -- an estimated $124 billion this year, leaving $21 billion in free cash flow. This isn't nearly all retail-related; much of the spending is for AI. (See related article " AI Is Remaking Shopping. These Companies Are the Leaders.") There is an ongoing investor debate over whether companies are spending too much on AI, but not in Amazon's case. Its Amazon Web Services business has a long record of turning data-center investments into lucrative cloud computing revenue. Now, AWS Bedrock, a platform for building AI tools using any of hundreds of models, like Claude from Anthropic or Llama from Meta Platforms, has more business than it can handle. Last quarter, AI demand sent AWS revenue 20% higher, the unit's fastest growth in three years. Management promised lavish capex. Shares jumped 10% in a day.

Amazon's past cloud computing investments came with side benefits -- like keeping Prime Video cheap enough to offer as a freebie for Amazon Prime shoppers. Today, Prime Video and its live sports lineup are part of an advertising empire that brought in revenue of $17.6 billion last quarter, up 22%. Likewise, Amazon's spending on AI-for-hire infrastructure brings plenty of opportunities for in-house uses. Rufus has been used by more than 250 million customers this year, and is tracking toward $10 billion in annualized sales. Apparently, Rufus users are 60% more likely than others to buy.

Beyond Rufus, Amazon's AI helps sellers to make their pitches more presentable, and shoppers use it to get fit recommendations, skim highlights of customer reviews, and search for objects by pointing their cameras at them. Supply-chain workers use it to predict demand surges and stock goods closer to buyers. This year, Amazon deployed its millionth robot, and treated the fleet to a new data model that improved travel time by 10%. AI is also improving the success rate on advertising, and there is no end of spare surface area for sponsorship -- including Rufus chats.

Among the handful of analysts who've ventured free cash flow forecasts for Amazon three years from now, the lowest says about $55 billion, and the highest, $157 billion. That kind of high uncertainty isn't typically comforting. But in this case, it comes from not knowing how long the high returns for colossal capex will last, after which Amazonian levels of free cash flow are inevitable. It's enough to make a $2.5 trillion company look like a bargain.

Write to Jack Hough at jack.hough@barrons.com. Follow him on X and subscribe to his Barron's Streetwise podcast.

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November 26, 2025 14:06 ET (19:06 GMT)

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