The recent market downturn has created several favorable opportunities for equity investments. One growth stock worth considering is Amazon (NASDAQ: AMZN), whose share price has decreased approximately 20% from its peak at the time of writing.
Let’s explore why Amazon is a compelling buy during this market dip.
A Major Investor
Historically, Amazon has made significant investments in building its business. The company has developed the world’s largest warehousing and logistics network from the ground up, evolving from an online bookstore to the leading e-commerce platform globally.
Interestingly, its most profitable segment isn’t e-commerce; that distinction belongs to Amazon Web Services (AWS), which pioneered the infrastructure-as-a-service model when it launched in 2006. The company navigated its own challenges in scaling infrastructure while aiding partners in building their platforms.
Investing in AI
Amazon is currently entering another significant investment phase focusing on artificial intelligence (AI). AWS has benefited from this trend, as the company is leading efforts to aid clients in developing AI models and applications. With its BedRock platform, Amazon provides various prominent foundational AI models and has developed its models alongside offering well-known options like Meta Platforms‘ Llama and other notable models. Furthermore, its SageMaker platform assists developers in creating, training, and deploying customized models.
Strong Growth in AWS
Amazon has also created its own AI chips through its Annapurna Labs subsidiary to enhance both AI training and inference. These custom chips are optimized for their specific tasks and are more energy-efficient, resulting in cost savings. AI has driven AWS’s impressive growth, with segment revenue increasing by 19% last quarter. Due to high demand, the company is investing $100 billion in capital expenditures this year, primarily to expand data center capacity for AWS.
E-Commerce Leadership
While AWS and its AI prospects are receiving much attention, Amazon continues to excel in e-commerce. This segment is still growing robustly, with North American revenue rising 10% in Q4 and international revenue up 8%. The company is improving operating income at a rate surpassing its revenue growth, with North American operating income soaring 43% last quarter and international operations shifting from a $419 million loss to a $1.3 billion profit. This efficiency is partly driven by AI, which helps optimize inventory forecasts, delivery routes, and warehouse operations.
Valuation Insight
The drop in Amazon’s stock price has resulted in an attractive valuation, trading at a trailing price-to-earnings (P/E) ratio of 34.5 and a forward P/E just over 25 based on 2026 analyst projections. This marks one of the lowest valuations the stock has experienced in quite some time, making it an appealing investment opportunity.
Conclusion
With significant AI opportunities ahead and a favorable valuation, now is an excellent time to consider purchasing shares of Amazon.
