Best Growth Stock to Buy Right Now: Amazon vs. MercadoLibre

Amazon's AWS remains the primary profit engine while the company plans a $200 billion capex program this year (after $132 billion in 2025), despite generating $11 billion of free cash flow (excluding capex) and holding roughly $123 billion in liquidity; heavy AI-related investment has pressured investor sentiment. MercadoLibre's fintech arm, Mercado Pago, is weighing on profitability as provisions for doubtful accounts rose ~58% to over $2.1 billion in the first nine months of 2025 even as revenue surged ~37% over the same period; the companies' market caps (~$2.25 trillion for Amazon vs. ~$100 billion for MercadoLibre) frame a tradeoff between scale/liquidity and higher-growth, higher-risk exposure in Latin America.

Analysis

Market Structure: AWS-led AI capex winners include NVDA, AMD, and data-center infra suppliers; cloud AI customers (enterprises) gain improved services while mid-tier cloud competitors (smaller CSPs) see margin pressure. MercadoLibre’s fintech shock hurts Latin American non-bank lenders and raises funding costs for riskier consumer credit; e‑commerce merchants benefit from increased payment penetration.

Risk Assessment: Tail risks include AI capex write-offs at Amazon (>=$50B impairment scenario over 2 years) and a LatAm macro shock (GDP contraction >3% or unemployment +300bps) that pushes MercadoPago NPLs above 5% national portfolios, forcing credit curtailment. Immediate (days) effects are sentiment-driven vol spikes; short-term (quarters) show earnings/credit-provision swings; long-term (years) hinge on AI monetization and regional macro stability.

Trade Implications: Constructive trades: long select AI infra (NVDA) and cautious long in AMZN-sized exposure funded by selling short-dated volatility on AMZN if implied vol pricey. For MELI, prefer growth exposure sized to risk with active hedges (puts or pair shorts on Latin bank/consumer finance). Monitor liquidity/FX hedges for LatAm exposure and use 3–9 month options to control drawdowns.

Contrarian Angles: Consensus underestimates optionality from Amazon’s $200B capex—if 10–15% translates to recurring SaaS/AI revenue by 2028, market will re-rate margins upward. Conversely, MercadoLibre’s AI underwriting could halve provision growth within 6–12 months; current risk premium may be overstated. Historical parallel: Amazon’s early heavy capex (2010s) preceded durable margin expansion; misuse of that playbook as purely “spend risk” is likely a shortsighted framing.

Key Decisions for Investors

• Establish a 2–3% long position in AMZN using a 9–12 month 10% OTM call spread to capture upside from AWS/AI monetization while limiting capital; increase to 5% if FY27 free cash flow ex-capex recovers above $15B or capex guidance falls below $150B.
• Establish a 2–3% long position in MELI funded by cash or small short in ILF (iShares Latin America ETF) to hedge regional macro; simultaneously buy a 6–9 month protective put at ~15% OTM and trim by 50% if provision growth exceeds 30% y/y for two consecutive quarters.
• Buy a 2% core long in NVDA (ticker NVDA) as a direct beneficiary of Amazon’s $200B AI capex and related semiconductor tightness; take profits on a +40–60% rally or if NVDA gross margins contract by >500bps sequentially.
• Reduce exposure to Latin American consumer finance equities by 30% and short ILF size-matched to MELI exposure until MercadoPago 90+ day NPL rate stabilizes or provisions growth slows below +15% y/y over two quarters; hedge currency risk with a USD/BRL forward if Brazilian revenue >20% of position value.