Groceries Are Now Tech

The conundrum for these gargantuan Silicon Valley tech companies is that they are so thirsty to grow revenue that they simply need to look at other industries.

Done are the days when tech stayed in its own lane.

In 2025, American tech firms are those pesky motorcyclists snatching your purse as they fly by on the scooter.

We are really getting into the late innings of the bull cycle, and I do believe this iteration of tech in 2025 is getting a little dark.

They weren’t saints to begin with, but that’s how competitive it is out there when multiple big tech firms are stepping on each other’s toes.

Look, for instance, how AI became competitive so quickly, and ChatGPT isn’t even leading generative AI anymore.

They haven’t been able to keep up with others who have pulled ahead.

So little did we know that a bombshell headline hit this morning with Amazon announcing it plans to more than double its grocery footprint in the US by the end of 2025.

This is a bold escalation in its ambition to dominate the $1.5 trillion U.S. grocery market.

This expansion, leveraging Amazon’s existing infrastructure and innovative business models, is a daring strategy to take over more of the non-tech business by onboarding it into the tech ecosystem.

The grocery sector, while high-volume, operates on razor-thin margins—typically 1-3%—compared to Amazon’s high-margin businesses like AWS (46% gross margins).

Investors may view this expansion as a high-risk, high-reward move.

However, continued losses could drag earnings, with a bear case projecting a potential stock price drop to $160 due to persistent grocery struggles and other challenges like third-party seller attrition.

Here is the bullish case: successful execution could drive the stock over $300, particularly if Amazon leverages its grocery push to deepen Prime membership engagement and boost high-margin advertising revenue.

However, the grocery segment’s current 3% U.S. market share (compared to Walmart’s (WMT) 21.2%) and past struggles with physical retail temper expectations.

Whole Foods remains the cornerstone, with 30 new stores planned annually and the introduction of smaller-format Daily Shops (9,100 square feet) targeting urban consumers with grab-and-go meals.

However, thin margins and fierce competition pose risks. For the stock, grocery success could add modest upside, but AWS and advertising remain the core drivers. Investors should monitor Prime Day 2025 and fulfillment pilots for signals of traction, while hedging regulatory risks from an upcoming FTC antitrust trial.

What I am worried about here is the company from Arkansas, Walmart.

They have been quite the revelation with their tech pivot into groceries and have the early mover advantage.

The case I have against CEO Andy Jassy is that he is quite reactionary and not a visionary.

The drop off in management has been quite stark at Amazon, and I am surprised this wasn’t looked at 5 years ago.

Being late to the game is a death knell in Silicon Valley.

This goes to show that AMZN isn’t the driving force in tech it once was.

Luckily, they still have their cloud business to rely on, and with buybacks going into overdrive, they would be able to shed a losing grocery business quite quickly.

I would watch carefully to see how big or small this becomes, but in terms of margins, this could be a killer.

Amazon stock will go up over time, but betting big in grocers might slow it down a little.

This also means higher grocery prices if tech is getting into the game.