One of the world's best-performing stocks of all time has been a dud in recent months. Shares of Amazon (AMZN 1.47%) plunged after the company announced its fourth-quarter results on Feb. 5, 2026. The stock is now below its peak achieved in early November of last year by a high double-digit percentage.
However, buying Amazon stock when it's down this much has always paid off in the past. Will it again?
NASDAQ: AMZN
Key Data Points
Amazon's AI investment isn't as scary as it seems
Amazon's steep sell-off is primarily due to investors' fears about the company's massive investments in artificial intelligence (AI) infrastructure. The company projects capital expenditures of around $200 billion this year, with much of that spending focused on AI. However, Amazon's huge AI investment isn't as scary as it seems (or, at least, shouldn't be).
CEO Andy Jassy noted in Amazon's Q4 update that the customer demand for Amazon Web Services (AWS) in running core and AI workloads is soaring. Indeed, AWS' revenue jumped 24% year over year in Q4 -- its fastest growth rate in 13 quarters.
Jassy said that AWS is "monetizing capacity as fast as we can install it." With this strong demand, it only makes sense that Amazon would invest as much as possible in building out its AI infrastructure.
Some investors are concerned that the company is doing too much too quickly, though. But Jassy pointed out in the Q4 earnings call that management has "deep experience understanding demand signals in the AWS business and then turning that capacity into strong return on invested capital." He added, "We are confident this will be the case here as well."
The numbers appear to justify his optimism. AWS' backlog at the end of 2025 totaled $244 billion, up 40% year over year and, even more impressively, up 22% quarter over quarter.
Image source: Getty Images.
Beyond the cloud
While AWS is indisputably the most important growth engine, it's worth remembering that Amazon ranks as the world's largest consumer discretionary company by market cap. Amazon's businesses beyond the cloud continue to grow sales by double-digit percentages.
Sure, geopolitical issues and skyrocketing oil prices could derail the U.S. economy, which would likely hurt Amazon's e-commerce business. However, the company is better-positioned than most to navigate turbulent waters. Profitero recently named Amazon the lowest-priced retailer in the U.S. for the ninth consecutive year and found that its prices were 14% lower on average than those of other major online retailers. This advantage should help Amazon if consumers further tighten their purse strings.
Amazon's advertising business is booming. The company reported $21.3 billion of advertising revenue in Q4, up 22% year over year. Sponsored products on Amazon's e-commerce platform continue to generate the most ad revenue, but Prime Video ads are also a significant growth driver.
Throughout its history, Amazon has continually pursued new opportunities. That hasn't changed. The company is making a big effort to win in the satellite internet services market with LEO (formerly known as Project Kuiper). Amazon plans to launch the service this year and has already signed multiple major agreements with customers, including AT&T (NYSE: T), DirecTV Latin America, and JetBlue (JBLU 5.56%).
A stock to always buy on the dip
Wall Street believes that Amazon's pullback presents a great opportunity for investors. Of the 67 analysts surveyed by S&P Global (SPGI 2.01%) in March, 63 rated the stock as a "buy" or "strong buy." The consensus 12-month price target for Amazon implies roughly 33% upside.
My fellow Motley Fool contributor Matt DiLallo predicts that Amazon stock could nearly double by 2030. He acknowledges the risks associated with the company's massive AI investments but thinks that "the reward potential is hard to ignore." I agree wholeheartedly.
Will Amazon's shares jump more than 30% over the next 12 months, as Wall Street expects, and by nearly 100% over the next five years, as Matt predicts? I don't know. What I do know, though, is that Amazon is a stock to always buy on the dip if you're a long-term investor.
