Stock market volatility isn't all bad. Sure, it creates stress for investors who watch their portfolio balances bounce all over the place. However, volatility can create great buying opportunities if you're focused on the long term.
I think Amazon (AMZN 0.87%) provides a fantastic example. Shares of the e-commerce and cloud services giant are down roughly 15% below a high set earlier this year. But this growth stock should still have plenty of room to run.
Near-term uncertainty
Investors should not stick their heads in the sand and ignore Amazon's challenges. The company faces near-term uncertainty because of the Trump administration's tariffs.
It's no secret that higher prices can cause consumers to tighten their purse strings. The tariffs that have been announced will likely lead to higher prices on many products, and this could hurt Amazon's e-commerce business. However, I suspect the negative impact on Amazon won't be too bad.
Amazon CEO Andy Jassy pointed out in the company's first-quarter earnings call that Amazon's huge selection of products can often enable it to "weather challenging conditions better than others." Importantly, many of those products are everyday essentials that consumers will buy even if prices increase.
Jassy also noted that "when there are uncertain environments, customers tend to choose the provider they trust most." He argued that Amazon's broad product selection, prices, and fast delivery should position it well, and he expressed optimism that the company would be able to increase its market share despite the uncertainty. I think Jassy's confidence is warranted.
A significant AI tailwind
Even if Amazon experiences difficulties in the near term, the company should grow over the long term thanks to major tailwinds. We can probably put artificial intelligence (AI) at the top of the list.
Amazon's biggest growth driver is its cloud services unit, Amazon Web Services (AWS). In Q1, AWS' revenue soared 17% year over year -- more than twice as much as Amazon's North America segment, which includes its e-commerce and advertising businesses.
While AI is already making a big impact in many areas, Jassy said in his latest letter to Amazon shareholders that he believes that other areas that AI is changing "are still in their infancy." He's right. And with a large percentage of AI models hosted in the cloud, AWS should be a major beneficiary of future AI growth.
However, AWS isn't the only way Amazon will profit from AI. The company is using AI, especially generative AI, to help shoppers and sellers on its e-commerce platform, and its next-generation Alexa+ voice assistant could attract more subscribers for Amazon Prime.
Image source: Getty Images.
"The world's largest start-up"
Jassy referred to Amazon in his recent shareholder letter as "the world's largest start-up." This mentality might be the best reason to buy the stock. Amazon isn't going to rest on its laurels.
As a case in point, the company has begun to deploy its Project Kuiper satellites, and plans to launch its satellite internet network service to customers later this year.
Also exciting is that Amazon's Zoox self-driving car unit recently began testing in Los Angeles. Zoox already operates a robotaxi service in Las Vegas. It plans to expand into San Francisco, Austin, and Miami soon.
Quantum computing presents another potential game-changing opportunity for Amazon. The company announced its first quantum computing chip prototype, Ocelot, in February 2025. Ocelot reduces the resources needed for quantum error correction by up to 90%.
Unlike most start-ups, though, Amazon has a boatload of money to invest in new initiatives. The company generated revenue of $155.7 billion and profits of $17.1 billion in the first quarter. Amazon's cash stockpile is close to $95 billion.
Every time Amazon stock has retreated by 15% or more in the past, buying shares turned out to be a smart move for investors who could stay invested. I fully expect that history will repeat itself.
