It does create a misrepresentation of the valuation as AWS is able to represent the investment as the retail price ($2.7B) while actually they're only parting with the COGS for the AWS services (<$2.7B).
(not legal or securities law advice)
So the harm is that some massive VCs with billions of dollars to spend on their investments, might be a bit more confused about what someone else's "real" valuation is?
They are qualified investors. I think they can do the work on their own to correct it to the "real" valuation.
I am not sure what is confusing about this. If a company is too expensive, the qualified investors who are spending their investment dollars are free to not buy equity in those too expensive companies.
They manage billions of dollars! I am sure they can figure out how much a company is actually valued! They aren't going to be "tricked" by some valuation scheme that randos are pointing out in HN comments.
Represent it where? In 3rd party journalists who cover it? Or on public market financial statements?
It includes the profit-value, defined by Amazon itself, that Amazon is getting from running their own servers. Not the real, actual costs.