Retail’s rural rivalry

The two biggest retailers in the world are going head to head, ramping up AI strategies in a race to capture the next wave of online shopping. For Amazon, that means $200 billion in capex to roll out AI tools like “Buy for Me”, alongside its shopping assistant Rufus. As for Walmart, it’s working with OpenAI and Google to embed shopping into platforms like ChatGPT and Gemini, while deploying its own chatbot named “Sparky.”

So, who’s going to develop the latest, cutting-edge AI tech before the competition?

Who cares—the real battleground is rural America.

The $1 trillion opportunity

While city folk might need deep pockets to afford their daily mocha chai lattes, rural consumers spend roughly $1 trillion annually, and account for 20% of all retail purchases, excluding cars and gas. They’re an underappreciated market, and both companies are racing to win those customers—with very different strategies.

Amazon is betting on speed, investing $4 billion into rural logistics. Rural customers were once forced to wait half a week or more for their Amazon deliveries to arrive—today, one in five rural and small-town households receive orders within 24 hours, and 62% do within 48 hours. The company also plans to scale to 200 rural delivery stations by year-end, up from 70 in 2023.

Walmart is leveraging proximity. With 4,600 US locations and 90% of Americans living within 10 miles of a store, it already has deep rural reach. Now, it is turning those stores into delivery hubs and pickup points, strengthening its e-commerce capabilities.

The market divide

While both are making big strides, the market is split: Amazon is down 13.64% YTD, while Walmart is up 10.3%.

Bulls argue Walmart can win more efficiently. Mizuho analyst David Bellinger says the company can leverage AI without spending billions to build it, instead “borrowing” hyperscaler capex through partnerships and integrating those technologies into its ecosystem.

Amazon’s pullback reflects investor concerns around its massive spending, but don’t discount it just yet: The stock is now cheaper than Walmart—a rare reversal—with its forward EV/EBITDA multiple at an 18-year low. Jefferies analyst Brent Thill calls it “mispriced,” maintaining a buy rating and seeing 46% upside from today’s price.

That’s driven by strong fundamentals: Amazon’s retail business has already matched Walmart in gross merchandise volume while growing faster (10.9% vs. 4.7% last year) and with higher margins (5.8% vs. 4.4%). It also maintains a dominant 40.4% share of the e-commerce market, compared to Walmart’s 10.6%.

So, while Walmart may look like the safer bet today, Amazon’s investments could pay off for shareholders. But for now, the race is far from over.—SY