Here’s a stock that stands out as a worthy investment during this market downturn.
Key market indexes were experiencing declines on Monday morning, spurred by new tariff news that has introduced a level of uncertainty. This follows a significant sell-off in software stocks that has gained traction over recent weeks. As investors offload shares, are there any viable opportunities? Broad market declines can often present excellent chances when high-quality companies drop alongside weaker stocks.
One stock that may be worth looking into during this downswing is Amazon (AMZN 2.69%). This stock has taken an even bigger hit than the overall market this year, falling approximately 12% year-to-date, following underperformance against the S&P 500 in 2025.
Solid Performance Amid Investment Pressure
Despite widespread skepticism over the stock, Amazon reported strong fourth-quarter results. The primary concern about elevated AI (artificial intelligence) investment spending seems more like a minor short-term disruption rather than a significant issue.
Demonstrating robust growth, Amazon’s fourth-quarter net sales increased by 14% year-over-year to $213.4 billion (12% when excluding foreign exchange). Additionally, sales from Amazon Web Services (AWS) rose by 24% to $35.6 billion. AWS’s growth is accelerating, with fourth-quarter growth improving from 20% in fiscal Q3 2025 to 24%.
Free Cash Flow Decline: A Concern?
However, one concerning figure from the report is the sharp decline in Amazon’s free cash flow, which fell significantly year-over-year. While operating cash flow increased by 20% to $139.5 billion, free cash flow dropped from $38.2 billion to $11.2 billion. Amazon attributed this decline mainly to a $50.7 billion increase in capital expenditures, largely due to investments in AI.
This perspective can also be interpreted positively: Amazon is identifying substantial growth opportunities and is investing heavily to leverage them. CEO Andy Jassy highlighted this in the fourth-quarter earnings release, stating, “With strong demand for our existing offerings and opportunities like AI, we anticipate investing about $200 billion in capital expenditures across Amazon by 2026.” Although there’s a risk of prolonged high spending, the expectation is strong long-term returns on invested capital.
Why the Current Dip is a Buying Opportunity
Ultimately, the appeal of Amazon amid this market dip lies in its ability to generate sufficient profits and cash flow to support extensive AI investments while sustaining growth in its core operations. The fourth-quarter results showcase Amazon’s diverse growth engines, including a renewed acceleration in AWS’s growth rate. While risks exist, recent sell-offs may have already factored these in. The strength of Amazon’s business and its cash-generating capabilities suggest it may be a prudent time to buy on weakness.
