Amazon (AMZN 1.88%) stock gained 11% in May, according to data provided by S&P Global Market Intelligence. While there wasn't any new specific to Amazon, many stocks gained on the pause in tariffs on Chinese goods.
The leading U.S. e-commerce retailer
Amazon has an unbeatable hold on U.S. e-commerce. It has a strong moat in its scale and dominance, and it's always upgrading its platform to stay on top.
CEO Andy Jassy noted on the most recent earnings call that Amazon has several advantages over other retailers in reference to higher tariffs. He pointed out that Amazon mostly sells low-priced essentials, which puts it in a strong position when it comes to tariffs. It works with many sellers and has millions of products, and customers are likely to be able to find what they need somewhere on the platform. On top of that, in times of uncertainty, shoppers tend to shop with a name that they trust, and Amazon has been building that for years.
Image source: Amazon.
However, Amazon is still trailing the broader market this year. E-commerce and related services make up about 68% of its sales, and that could be negatively impacted by higher tariffs. Despite the growth in artificial intelligence (AI) and long-term drivers, the market has been worried about tariffs, sending Amazon stock down. So it was pleased with the announcement of a pause in higher tariffs with China.
Much more than e-commerce
AI is already a multibillion-dollar run rate business for Amazon, and it represents its future. "Before this generation of AI," Jassy said, "we thought AWS had the chance to ultimately be a multi-hundred-billion-dollar revenue run rate business. We now think it could be even larger." Amazon is working feverishly to stake its claim as the top generative AI platform in cloud computing. It's already the top cloud business in the world, with 30% of the global market, and it's pouring money into developing a comprehensive generative AI infrastructure, including making its own more budget-friendly chips. Jassy said Amazon would spend north of $100 billion on AI in 2025 alone, more than any other business of its type.
With so much potential at its fingertips, smart investors see a short-term dip as an excellent long-term buying opportunity. Even up in May, Amazon stock is down 6% this year, and it trades at a P/E ratio of 33. That's just above its five-year low of 27, which it hit in April. There may be some lumpiness for the next bit, but expect Amazon stock to rise over time.
