Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk for the effect of interest rate changes, foreign currency fluctuations, and changes in the market values of our investments. Information relating to quantitative and qualitative disclosures about market risk is set forth below and in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and our debt. Our long-term debt is carried at amortized cost and fluctuations in interest rates do not impact our consolidated financial statements. However, the fair value of our long-term debt, which pays interest at a fixed rate, will generally fluctuate with movements of interest rates, increasing in periods of declining rates of interest and declining in periods of increasing rates of interest.
We generally invest our excess cash in AAA-rated money market funds and investment grade short- to intermediate-term marketable debt securities. Marketable debt securities with fixed interest rates may have their fair market value adversely affected due to a rise in interest rates, and we may suffer losses in principal if forced to sell securities that have declined in market value due to changes in interest rates. The following table provides information about our cash equivalents and marketable debt securities, including principal cash flows by expected maturity and the related weighted-average interest rates as of December 31, 2023 (in millions, except percentages):
2024 2025 2026 2027 2028 Thereafter Total Estimated Fair Value as of December 31, 2023
Money market funds $ 39,160 $ — $ — $ — $ — $ — $ 39,160 $ 39,160
Weighted average interest rate 5.32 % — % — % — % — % — % 5.32 %
Corporate debt securities 25,075 2,227 715 9 — — 28,026 27,805
Weighted average interest rate 5.13 % 1.30 % 1.51 % 2.33 % — % — % 4.74 %
U.S. government and agency securities 552 501 398 50 43 230 1,774 1,699
Weighted average interest rate 3.24 % 1.49 % 1.12 % 0.97 % 0.67 % 1.31 % 1.89 %
Asset-backed securities 789 349 115 143 13 291 1,700 1,646
Weighted average interest rate 1.34 % 2.09 % 1.20 % 1.67 % 1.66 % 1.33 % 1.51 %
Foreign government and agency securities 506 — — — — — 506 505
Weighted average interest rate 5.28 % — % — % — % — % — % 5.28 %
Other debt securities 62 46 — — — — 108 104
Weighted average interest rate 0.55 % 1.07 % — % — % — % — % 0.78 %
$ 66,144 $ 3,123 $ 1,228 $ 202 $ 56 $ 521 $ 71,274
Cash equivalents and marketable debt securities $ 70,919
As of December 31, 2023, we had long-term debt with a face value of $67.2 billion, including the current portion, primarily consisting of fixed rate unsecured senior notes. See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 6 — Debt” for additional information.
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Foreign Exchange Risk
During 2023, net sales from our International segment accounted for 23% of our consolidated revenues. Net sales and related expenses generated from our internationally-focused stores, including within Canada and Mexico (which are included in our North America segment), are primarily denominated in the functional currencies of the corresponding stores and primarily include Euros, British Pounds, and Japanese Yen. The results of operations of, and certain of our intercompany balances associated with, our internationally-focused stores and AWS are exposed to foreign exchange rate fluctuations. Upon consolidation, as foreign exchange rates vary, net sales and other operating results may differ materially from expectations, and we may record significant gains or losses on the remeasurement of intercompany balances. For example, as a result of fluctuations in foreign exchange rates throughout the year compared to rates in effect the prior year, International segment net sales increased by $88 million in comparison with the prior year.
We have foreign exchange risk related to foreign-denominated cash, cash equivalents, and marketable securities (“foreign funds”). Based on the balance of foreign funds as of December 31, 2023, of $23.5 billion, an assumed 5%, 10%, and 20% adverse change to foreign exchange would result in declines of $1.2 billion, $2.3 billion, and $4.7 billion.
We also have foreign exchange risk related to our intercompany balances denominated in various currencies. Based on the intercompany balances as of December 31, 2023, an assumed 5%, 10%, and 20% adverse change to foreign exchange rates would result in losses of $320 million, $640 million, and $1.3 billion, recorded to “Other income (expense), net.”
See Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Effect of Foreign Exchange Rates” for additional information on the effect on reported results of changes in foreign exchange rates.
Equity Investment Risk
As of December 31, 2023, our recorded value in equity, equity warrant, and convertible debt investments in public and private companies was $9.6 billion. Our equity and equity warrant investments in publicly traded companies, which include our equity investment in Rivian, represent $5.7 billion of our investments as of December 31, 2023, and are recorded at fair value, which is subject to market price volatility. We record our equity warrant investments in private companies at fair value and adjust our equity investments in private companies for observable price changes or impairments. Valuations of private companies are inherently more complex due to the lack of readily available market data. The current global economic conditions provide additional uncertainty. As such, we believe that market sensitivities are not practicable. See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 1 — Description of Business, Accounting Policies, and Supplemental Disclosures” for additional information.
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