Jeff Bezos' Riskiest Investment — and Why It Almost Bankrupted Amazon
Today, Amazon is one of the world’s leading companies, with a market value of roughly $3.06 trillion, according to StockAnalysis. But long before founder Jeff Bezos became one of the richest people on the planet, he made a series of bold bets that could have ended very differently.
Most people know about Bezos leaving a high-paying Wall Street career to start an online bookstore in 1994, a move that was not guaranteed to succeed. But 12 years later, he made another gamble—one that many believed was even riskier.
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Amazon Web Services
In 2006, Bezos launched Amazon Web Services (AWS), a platform where consumers can rent computing services and pay only for the power and storage they use. It allowed startups, college students and others to avoid using physical machines and managing servers to store data.
However, the innovative idea wasn’t a sure thing, and Bezos faced significant backlash for it. As CNBC reported in a 2022 retrospective, BusinessWeek described AWS as "Bezos' biggest bet since he and his wife, MacKenzie, drove west in 1994 to seek fame and fortune on the Net."
Today, cloud computing is commonplace, but at the time, the concept was largely unproven.
A Billion-Dollar Company Built on Big Risks
Building AWS required Amazon to heavily invest in data centers, networking infrastructure and engineering talent years before the business generated meaningful profits. Critics questioned why an online retailer was pouring so much money into an enterprise technology business that seemed far removed from selling books and consumer goods.
The enormous upfront costs also put pressure on Amazon's already thin margins, leading some investors to worry that Bezos was stretching the company's finances too far.
The Gamble Paid Off
Within a few years, AWS became the industry leader in cloud computing and evolved into Amazon's most profitable business, estimated at between $1.0 trillion and $2.6 trillion if it were a standalone company (it’s a subsidiary of Amazon and not independently traded). What once looked like a risky move became a mega hit.
Bezos Laughed at the Critics
BusinessWeek was among the publications skeptical of AWS when it launched, but Bezos never seemed bothered by the criticism. In 2022, Bezos took to X (known as Twitter at the time) to poke fun at the outlet and wrote, “I have this old 2006 BusinessWeek framed as a reminder. The 'risky bet' that Wall Street disliked was AWS, which generated revenue of more than $62 billion last year.”
Not All of Bezos’ Investments Were Celebrated
Bezos has obviously had more wins than losses, but not everything he’s invested in took off. The Fire Phone is one example that did not live up to expectations. As a result of poor sales, Amazon was forced to write off $170 million on unsold Fire Phones, Time reported.
With that in mind, AWS is an important lesson for investors: Opportunities often require significant upfront investment and can face years of skepticism before their value becomes clear.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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