Amazon: A Strong Investment Choice in Today’s Market

The stock market has seen impressive gains this year, with Amazon (NASDAQ: AMZN) standing out as a leading performer. The stock is up approximately 48% year-to-date and has soared more than 150% over the last five years. This recent success positions Amazon as a compelling option for investors in the current bull market.

Here are four key reasons why investors should consider buying Amazon stock today.

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1. Dominance in Cloud Computing

While Amazon is widely recognized as an online retailer, its most profitable segment is actually Amazon Web Services (AWS), the company’s cloud division. In the past year, AWS generated an operating income of $36.4 billion. Meanwhile, Amazon’s North American operations yielded $22.2 billion, and the international segment brought in $2.1 billion.

AWS maintains a significant lead in the cloud market, claiming around 31% share, compared to Microsoft’s Azure at 20% and Alphabet‘s Google Cloud at 12%. The sector has seen accelerated growth, particularly with the rise of artificial intelligence (AI). Last quarter, AWS revenue climbed 19% year-over-year, and income skyrocketed by 49%. Amazon’s management described generative AI as a “once-in-a-lifetime opportunity,” with AI-related revenue from AWS experiencing triple-digit percentage increases last quarter.

To seize this AI opportunity, Amazon is seeing more businesses adopt its SageMaker platform, which assists in building AI models and managing AI data. It has also introduced foundational AI models through its Bedrock platform, adding models from Meta Platforms, Anthropic, and Mistral recently.

Additionally, Amazon is producing custom AI chips designed for training large language models (LLMs), with Apple recently becoming a customer.

Image source: Getty Images

2. E-commerce Leadership Continues

Despite AWS becoming the cornerstone of Amazon’s success, the company is still the undisputed leader in online retail. Although the e-commerce growth rate has stabilized, the retail sector still shows solid performance. Last quarter, revenue from North American operations increased by 9% year-over-year, while international revenue rose by 12%.

Investments in automation and AI are enhancing warehouse efficiency and optimizing shipping routes, which are crucial for managing costs and boosting profitability. For instance, the operating income for North American operations surged by 33% year-over-year, and the international segment has returned to profitability.

Amazon is also leveraging AI to assist third-party sellers with product listings and to enhance customer experience with better product recommendations.

Moreover, the company is witnessing growth in its sponsored ad business, where AI contributes to the relevance of ads served.

3. A Track Record of Success

Amazon has consistently proven to be a leading player in the market. The company has navigated challenges and emerged as a powerhouse by continuously innovating and adapting.

Starting as an online bookstore, it transformed into the largest online retailer and logistics provider globally, effectively reshaping the retail industry. Its most significant growth area, AWS, originated from a side project that Amazon turned into a booming business.

Willing to invest heavily for growth, Amazon is poised to capitalize on the vast opportunities presented by AI.

4. Favorable Valuation Metrics

In addition to its strong market positions and growth prospects, Amazon’s stock is currently attractively valued. Its forward price-to-earnings ratio (P/E) is around 36.5 based on 2025 analyst estimates. Although the valuation has increased, it remains lower than historical P/E levels prior to 2023.

Periods of investment may temporarily affect earnings, but Amazon typically emerges stronger from such phases.

AMZN PE ratio (forward 1y); data by YCharts.

In summary, Amazon represents a solid investment opportunity characterized by a reasonable valuation and a rich history of innovation and success. This stock could serve as a core component of an investment portfolio.

Is Now the Time to Invest $1,000 in Amazon?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is part of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is also a board member. Randi Zuckerberg, a former market development director at Facebook and sister to Meta Platforms’ CEO, serves on the board as well. Geoffrey Seiler holds positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, and Microsoft. The Motley Fool also recommends specific options on Microsoft. Please refer to The Motley Fool’s disclosure policy for further details.

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