Amazon: An Attractive Investment Amid Market Turbulence

The markets are currently facing turbulence due to ongoing tariff concerns, and President Donald Trump’s recent “Liberation Day” tariff announcement has exacerbated these fears. Though some pain may persist, this sell-off has positioned several high-growth stocks at appealing price levels. Among these, Amazon (NASDAQ: AMZN) stands out, having declined by 25% recently. Here’s why investors should consider adding Amazon to their portfolios.

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A Market Leader

Amazon not only leads globally in e-commerce but also ranks as the third-largest digital advertising platform and the foremost cloud computing company. Currently, tariffs are likely to negatively impact Amazon’s e-commerce sector in the near to medium term. The U.S. lacks a substantial manufacturing base; most consumer goods are produced overseas, particularly in China and other Asian countries. Consequently, tariffs may raise retail prices and potentially trigger a decline in consumer spending or even lead to a recession.

On the other hand, Amazon is well-positioned for the long haul, benefitting from ongoing trends in e-commerce. The rise of smartphones continues to drive mobile commerce, while advancements in artificial intelligence (AI) enable more personalized shopping experiences.

Notably, Amazon’s e-commerce profits are increasing at a faster pace than its revenue, primarily due to AI-driven improvements in logistical and warehouse operations. AI optimizes route planning and enables robotics in warehouses to manage inventory and identify damaged goods, ultimately reducing return rates.

Additionally, Amazon’s advertising segment is contributing to profit growth, with sponsored ads being the main revenue source. In the last quarter, the company generated $17.3 billion in ad revenue, marking an 18% increase year-over-year.

Image source: Getty Images.

Amazon Web Services (AWS), the company’s cloud computing division, remains its most lucrative segment. In the previous year, AWS accounted for $39.4 billion—57% of the total operating income of $68.6 billion. The segment continues to grow rapidly, boasting a 19% revenue increase both last quarter and in 2024.

Amazon pioneered the infrastructure as a service model with the launch of AWS in 2006. Today, it maintains about a 30% share of the cloud market, leading ahead of Microsoft’s Azure at 21% and Alphabet’s Google Cloud at 12%.

AWS is increasingly valuable as it aids customers in developing and implementing AI applications. Amazon offers diverse AI foundation models, both its own and others, through its Bedrock solution. This allows organizations to tailor pre-trained models according to their requirements. Its SageMaker solution provides a more comprehensive platform for training and deploying custom AI models.

Moreover, Amazon has created custom AI chips—namely Trainium and Inferentia for training and inference respectively, as well as Graviton for general computing. While these chips may lack some flexibility compared to traditional graphics processing units (GPUs), they enhance performance and energy efficiency, leading to cost savings in cloud services.

Looking ahead, Amazon is making substantial investments in AI, with plans to allocate around $100 billion in data center capital expenditures (capex) to boost its capacity this year. This pattern of significant investment typically reflects the firm’s strategy to stay competitive in the evolving AI landscape.

An Attractive Valuation

The recent decline in Amazon’s stock price has brought its valuation to appealing levels. The company currently trades at a forward price-to-earnings (P/E) ratio of just over 28 based on annual analyst estimates, and 32.5 times on a trailing basis.

AMZN PE Ratio (Forward) data by YCharts.

While tariffs may impact earnings in the short term, they should not diminish Amazon’s long-term prospects. As a well-managed corporation known for investing in future growth, Amazon remains a compelling option for long-term investors.

Should You Invest $1,000 in Amazon Right Now?

Before making an investment in Amazon, take note of the following:

The Motley Fool Stock Advisor team has recently highlighted what they consider the 10 best stocks to invest in right now, and Amazon is not among them. The stocks that did make the list have high potential for substantial returns in the coming years.

For instance, if you had invested $1,000 in Nvidia when it was recommended on April 15, 2005, you’d now have $578,035!*

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Suzanne Frey, an executive at Alphabet, sits on The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is also on The Motley Fool’s board. Geoffrey Seiler holds positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool suggests the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

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