As market attention has shifted to the conflict in the Middle East, one might not have expected Amazon (AMZN +1.25%) to be at the center of controversy, but both external and internal threats have affected the company in recent days.
The Iran conflict hit Amazon directly when drones struck three of its data centers in the Middle East. Additionally, a "software deployment code" error caused ordering issues on its e-commerce site. And Amazon Web Services' generative artificial intelligence (AI) tools were found to have created code that it may not have properly debugged.
Amid all these challenges, the consumer discretionary stock has held steady, which may come as a surprise to many. In order to understand this situation, investors should keep two things in mind.
Image source: Amazon.
1. How Amazon reacted was more important than the challenges
Almost all of us have heard the adage that "life is 10% what happens to you and 90% how you react to it," and knowing that, customers and investors seem to like Amazon's response.
Amazon addressed its e-commerce outage by quickly moving to fix the bug and reassuring customers that it was not related to the attacks in the Middle East. And the company is now requiring AI-generated code to be reviewed and signed off on by senior engineers before it can be deployed.
For the data center attacks, its approach probably requires a longer-term plan. Still, Amazon has urged customers to turn to backup systems and begin disaster recovery as it seeks to improve the physical security of its properties.
Surprisingly, none of these incidents caused the stock price to drop, at least so far, showing investors that Amazon takes threats to its business seriously and does what it needs to do to affirm investor confidence. Time will tell whether the company has done what it needs to do to put these incidents behind it, but the lack of an initial reaction from shareholders bodes well for the stock.
2. The outages are probably not a buying opportunity
While reassuring shareholders, the stock's relative lack of stock price action came nowhere close to delivering a once-in-a-decade buying opportunity.
Since the beginning of March, Amazon's stock performance has been flat. This stands in contrast to the market's reaction after CrowdStrike's outage in the summer of 2024, when that stock lost almost 45% of its value within days.
NASDAQ: AMZN
Key Data Points
This different investor reaction indicates that Amazon has something that CrowdStrike does not -- a level of investor trust cultivated over a 29-year history. Thus, even though prospective buyers may have to accept the current valuation, they can at least know their holding will have a level of built-in confidence that is rare in the technology world.
Putting the Amazon outages into perspective
In the end, the market's reactions, or really lack thereof, to the IT-related incidents are a testament to the high degree of confidence Amazon has built with the public and the investment community.
It's still early, and it will likely take time to assess what Amazon will do in the Middle East to protect its assets. Nonetheless, Amazon's acknowledgment of the other issues and its quick actions to address those challenges seemed to reassure investors -- so much so that it appeared to avoid a significant stock price decline.
Hence, while those who want to buy the stock may have to pay more than they would like, they can at least know they probably have a solid holding in Amazon stock.
