If you want a diversified growth stock with a lot going for it, including massive demand for its AI (artificial intelligence) computing, Amazon (AMZN +3.38%) is worth a closer look. The company's latest results show improving growth rates in several key parts of its business, and AI looks like it could be a major growth opportunity for the company.
Even more, shares trade at a reasonable valuation considering the quality of the underlying business you get to own when you buy shares of Amazon.
Here's why Amazon tops my list of AI growth stock ideas in January.
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Accelerating growth where it matters most
Amazon's overall third-quarter results show a solid business. Third-quarter sales rose 13% year over year to $180.2 billion. While this wasn't an acceleration from its 13% growth in Q2, it is an acceleration from the 9% growth it posted in the first quarter of 2025. Even more, the company guided for a strong finish to the year. Management said it expected fourth-quarter sales for its important holiday quarter to be between $206.0 billion and $213.0 billion, translating to 10% to 13% year-over-year growth
Despite these results already looking good, I'd argue that they understate the company's momentum. Investors should note that Amazon's higher-margin businesses, specifically its cloud computing business, Amazon Web Services, and its advertising services business, actually saw their growth rates accelerate in Q3.
Amazon's advertising services revenue, for instance, rose 24% year over year in Q3 -- an acceleration from 23% growth in Q2.
And AI is fueling growth in Amazon's lucrative AWS business. In Q3, AWS segment sales rose 20% year over year to $33.0 billion, up from 18% growth in Q2 and 17% growth in Q1.
"AWS is growing at a pace we haven't seen since 2022," noted Amazon CEO Andy Jassy in the company's third-quarter update. During both the release and the earnings call, Jassy called out AI as a key driver of the business.
Soaring operating cash flow to fund investment opportunities
Additionally, the company's operating cash flow trends look particularly good. Amazon's trailing-12-month operating cash flow rose 16% year over year to $130.7 billion. This boost in cash flows from its regular operations comes at a good time, because the company has significant growth opportunities in AI that it wants to fund.
To this end, Amazon invested an incredible $34.2 billion in capital expenditures in Q3 alone. These investments, management explained in the company's third-quarter earnings call, are driven heavily by investments aimed to support AI.
"We'll continue to make significant investments, especially in AI, as we believe it to be a massive opportunity with the potential for strong returns on invested capital over the long term," explained Amazon chief financial officer Brian Olsavsky during the company's third-quarter earnings call.
Of course, these heavy investments mean that free cash flow, or the company's cash from regular operations less capital expenditures, is suppressed. Amazon's trailing-12-month free cash flow was $14.8 billion as of Sept. 30, 2025, down from $47.7 billion a year earlier.
NASDAQ: AMZN
Key Data Points
Why Amazon stock is a buy
Sure, there are risks associated with the company's heavy spending to support AI demand. This can pressure free cash flow for a while. Additionally, it's possible that Amazon's AI investments don't pay off as well as management hopes.
Further, Amazon's e-commerce and advertising businesses could take a hit if the economy weakens.
But the company's risks seem manageable. Management notably seems confident that its AI investments will pay off in a lucrative return over the long haul. And the company could always ease off the gas if it sees AI opportunities diminishing. Additionally, Amazon's operating cash flow seems sufficient to cover its capital expenditure plans.
With a valuation of 33 times earnings, shares don't look cheap. But a business with this many robust tailwinds deserves to trade at a premium valuation. Ultimately, I believe Amazon's diversified business remains a good investment at the stock's current price, despite the risks it faces.
