Baupost’s Seth Klarman Buys Amazon, Sells 41% of Top Rival

Baupost Group’s Value Investor Seth Klarman Increases Stake in Amazon While Reducing Position in Key Competitor

On Wall Street, data stands as the most prized asset, and investors seldom lack the insights needed to shape their strategies. With earnings reports rolling in and economic indicators released almost daily, significant developments can sometimes slip past even the most vigilant observers.

February 17 represented the filing deadline for institutional investors managing at least $100 million in assets under management to submit their Form 13F reports to the Securities and Exchange Commission. These documents offer a treasure trove of details regarding the stock purchases and sales executed by some of the sharpest minds in finance during the most recent quarter, specifically the one ending in December.

Although the legendary Warren Buffett, now retired, has traditionally commanded the most attention among billionaire portfolio managers, he is certainly not the sole figure whose moves captivate the investment community. Seth Klarman, the billionaire behind Baupost Group and a staunch advocate of value investing principles, remains another powerhouse whose every transaction draws intense scrutiny from fellow investors.

At the close of 2025, Klarman managed approximately $5.3 billion in assets, diversified across 22 different equity positions. Yet, the true narrative emerging from Baupost Group’s most recent 13F disclosure revolves around the fund’s activities concerning two of the market’s most dominant trillion-dollar enterprises. Klarman significantly boosted his investment in Amazon, a frontrunner in dual high-growth sectors, while simultaneously trimming his holdings in one of Amazon’s primary adversaries by a substantial 41%.

Amazon Emerges as Seth Klarman’s Second-Biggest Investment

During the quarter that concluded in December, Klarman either initiated or expanded a total of 10 positions, but none carried the weight of his acquisition of 2,121,391 shares in Amazon. This purchase represented over 9% of the fund’s total invested assets by the end of the year, elevating Amazon to Klarman’s second-largest holding overall. Notably, this marks a fresh entry for Amazon in Baupost’s portfolio, as the fund had previously divested its shares back in the third quarter of 2023.

Amazon’s business structure shines brightly due to its commanding presence in not one, but two expansive and rapidly evolving industries. For the majority of shoppers and market watchers, Amazon first enters the spotlight via its unparalleled online retail platform. Statistics compiled by Analyzify and Forbes Advisor indicate that in 2024, this marketplace captured 37.6% of all e-commerce expenditures within the United States, solidifying its position as the undisputed leader.

Nevertheless, the e-commerce division, while generating impressive revenue volumes, operates within slim profit margins characteristic of the sector. It is Amazon Web Services (AWS), the company’s powerhouse in cloud infrastructure services, that truly shoulders the burden of profitability and long-term value creation. According to projections from Synergy Research Group, AWS commanded a 28% portion of worldwide cloud infrastructure service expenditures during the fourth quarter of 2025.

From an investor’s perspective, AWS represents a particularly compelling opportunity because the surge in artificial intelligence adoption has dramatically amplified its expansion trajectory. Previously, AWS had maintained steady sales increases in the high teens percentage range, but fueled by AI innovations, its platform achieved 24% year-over-year growth on a constant-currency basis in the just-completed fourth quarter. Remarkably, even as AWS contributed only 18% to Amazon’s overall net sales in the prior year, it was responsible for generating 57% of the company’s approximately $80 billion in operating income.

As Amazon’s portfolio shifts toward these higher-margin pillars—encompassing AWS, subscription offerings like Prime, and burgeoning advertising revenues—the disparity between revenue growth and bottom-line expansion is poised to widen further. This evolution should propel operating cash flows and earnings per share upward at rates exceeding topline sales figures, enhancing the company’s financial profile over time.

Seth Klarman, with his keen eye for undervalued opportunities, appears to recognize substantial potential in these accelerating, high-margin segments of Amazon’s operations. As of mid-February, Amazon shares traded at a forward-year earnings multiple of 21 and a modest 9.8 times the anticipated cash flow for 2027. These metrics position the stock at a 51% discount relative to its average forward price-to-earnings ratio over the preceding five years, while also marking the lowest forward cash flow multiple since the company’s initial public offering in May 1997. For a value aficionado like Klarman, such metrics undoubtedly signal an attractive entry point.

Seth Klarman Reduces Exposure to Alphabet, Google’s Parent Company

In stark contrast to his aggressive accumulation of Amazon, Klarman orchestrated a significant divestiture from Alphabet, the corporate umbrella over Google. Precisely, he pared back Baupost’s position in Alphabet’s Class C shares (ticker: GOOG) by 41.5%, equivalent to offloading 770,957 shares. This move constitutes the second straight quarter in which the fund has meaningfully scaled back its Alphabet exposure.

Several factors might underpin Klarman’s decision to harvest profits from Alphabet. Positions within Baupost’s portfolio typically endure for just over two years on average, reflecting Klarman’s patient yet opportunistic style rather than high-frequency trading. With Alphabet’s stock price essentially doubling from May 2025 through year-end, capitalizing on those gains aligns logically with his methodology.

Valuation dynamics could also play a pivotal role in this transaction. Much like Warren Buffett, Klarman adheres rigidly to value investing tenets, prioritizing bargains with robust safety margins. While Alphabet continues to project strong value at a forward P/E ratio of 23—derived from consensus 2027 earnings per share estimates—it has shed the ultra-compelling discount it offered during the first half of 2025.

Looking further ahead, perhaps spanning five years or beyond, Klarman might one day reflect on this sell-off with some measure of hindsight regret. Alphabet maintains an ironclad dominance in internet search, a near-monopolistic stronghold untouched by serious challengers. Metrics from GlobalStats confirm Google’s command of 90% of global search traffic, making it an indispensable conduit for businesses aiming to connect with prospective customers.

Even more critically, Alphabet’s Google Cloud platform is experiencing explosive expansion, outpacing many peers in velocity despite lagging behind AWS in overall market share. By integrating advanced generative AI tools and large language models for its clientele, Google Cloud posted an impressive 48% revenue surge in the fourth quarter compared to the previous year. Now boasting an annual run-rate exceeding $70 billion, this division is rapidly maturing into Alphabet’s primary profit engine, capable of underwriting extensive investments across the broader ecosystem.

Klarman’s maneuvers highlight the nuanced decision-making that defines elite value investing. His embrace of Amazon underscores confidence in sustained leadership across e-commerce and cloud computing, particularly amid AI tailwinds boosting AWS. Conversely, trimming Alphabet reflects prudent profit realization amid a richening valuation, even as the company’s foundational strengths in search and accelerating cloud growth persist.

These 13F revelations serve as potent reminders of how billionaire investors navigate trillion-dollar titans. While past trades do not dictate future paths, Klarman’s choices invite deeper analysis into relative valuations, growth trajectories, and sector dynamics shaping these tech behemoths. For investors tracking Baupost’s playbook, Amazon’s ascent in the portfolio spotlights enduring opportunities in high-margin cloud services, whereas Alphabet’s reduction prompts evaluation of whether its premium pricing fully compensates for long-term prospects.

Baupost ended the year with a concentrated yet diversified lineup of 22 holdings totaling nearly $5.3 billion, exemplifying Klarman’s disciplined approach. The fund’s initiation of Amazon as a top-tier position via over 2.1 million shares speaks volumes about perceived undervaluation against robust fundamentals. Meanwhile, the 41% cut in Alphabet aligns with value tenets, booking gains after a stellar run while potentially reallocating capital to fresher bargains.

Amazon’s dual-market dominance—37.6% U.S. e-commerce penetration alongside 28% global cloud share—positions it for asymmetric upside as AI propels AWS beyond 24% growth. High-margin segments like cloud, subscriptions, and ads are set to eclipse low-margin retail, driving superior cash flow and EPS expansion. Trading at historically depressed multiples, Amazon embodies the value Klarman hunts.

Alphabet, despite the sell-off, retains unparalleled search moat at 90% share and Google Cloud’s 48% Q4 surge toward $70 billion run-rate. Forward P/E of 23 remains reasonable, suggesting Klarman’s move leans more toward tactical profit-taking than fundamental doubt. Investors weighing these stocks might ponder Klarman’s shift as a barometer for where value lies amid tech’s trillion-dollar arena.