Why Investors Should Consider Buying Amazon Stock Now

Investors face uncertainty in the market as they evaluate the potential impact of President Donald Trump’s tariffs on imports. The recent sell-off, particularly in the tech-heavy Nasdaq Composite, may signal a lack of optimism among market participants.

However, this dip in the market presents a buying opportunity for savvy investors, particularly for companies like Amazon (NASDAQ: AMZN). Amazon leads in both e-commerce and cloud computing and is expanding into artificial intelligence (AI) and advertising. Despite the market downturn, Amazon’s stock has decreased by 11%.

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Here are three reasons why investors should consider purchasing Amazon shares at this time.

Image source: Getty Images.

Amazon’s Strategic Position in AI Cloud Computing

Companies involved in AI data centers, like Nvidia and Broadcom, deserve the attention they receive as their processors propel the AI sector. However, cloud computing plays a crucial role in the growing AI market.

Goldman Sachs forecasts that global AI cloud sales will reach $2 trillion over the next five years. This positions Amazon well for growth, as it currently commands 31% of the U.S. cloud computing market, surpassing Microsoft and Alphabet. In 2024, Amazon Web Services (AWS) reported an operating income of $39.8 billion, marking a 62% increase from the previous year.

Despite increasing competition in AI cloud services, Amazon’s established market leadership gives it an edge over smaller competitors. As more businesses embrace AI-driven cloud solutions, Amazon stands ready to capitalize.

Strong Performance Across Core Businesses

Beyond AI cloud computing, Amazon’s core businesses are also thriving. The company’s North American operating income for the fourth quarter surged by 43% to $9.3 billion. Amazon dominates the e-commerce sector with a 40% share of the U.S. market, far outpacing Walmart, which holds only 7%. This presents significant growth potential, as e-commerce is projected to represent just 20% of total retail sales in the U.S. by 2028.

Additionally, Amazon’s advertising division is growing rapidly. In the fourth quarter, ad sales increased by 18% to $17.3 billion, and the company is on track to capture 15% of the digital ad market this year. Management anticipates annual ad revenue could reach $69 billion, a staggering leap from just $29 billion four years ago.

Opportunities for Investors Amidst a Market Pullback

Despite a forward price-to-earnings (P/E) ratio of about 29—greater than the S&P 500‘s 22—Amazon’s recent stock price decline presents a more attractive entry point for investors. Just three months ago, Amazon’s forward P/E was 45, significantly higher than the overall market.

The takeaway is clear: although market conditions have shifted, the fundamentals of Amazon’s business remain unchanged. The stock is now available at a comparatively lower price, making it a potentially appealing option for investors.

Navigating Market Volatility

During times of market volatility, it can be easy to panic and sell off stocks that were previously held with conviction. If you own Amazon, take a moment to reflect on your initial reasons for purchasing the stock. Determine if any significant changes have occurred that warrant a loss of confidence. If not, hold your position or even consider increasing your investment.

Should You Invest $1,000 in Amazon?

Before making a decision to invest in Amazon, consider this:

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For instance, when Nvidia was recommended on April 15, 2005, a $1,000 investment would be worth $666,539 today!

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John Mackey, the former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is also a board member. Chris Neiger does not hold a position in any stocks mentioned. The Motley Fool has investments in and recommends Alphabet, Amazon, Goldman Sachs Group, Microsoft, Nvidia, and Walmart. They also recommend Broadcom and have specific options strategies for Microsoft. The Motley Fool adheres to a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.