It's no secret that Amazon (AMZN +3.23%) has been one of the top-performing stocks of all time. That's why it's a little jarring to see shares down 20% from their high. But even the best stocks experience declines.
Ironically, declines are when long-term investors can make the most money. A world-class stock such as Amazon isn't going to go on sale very often. When valued against its cash flow from operations, Amazon stock is nearly the cheapest it's been in a decade.
Here are two big reasons why investors should buy into the stock's decline.
Image source: The Motley Fool.
1. Amazon's AI investments will likely pay off
One primary reason for Amazon's decline is its soaring capital expenditures (capex) on artificial intelligence (AI) data centers. The company plans to spend a staggering $200 billion on capex this year, up from an already steep $131.8 billion in 2025. All this spending is wiping out Amazon's free cash flow, so the market's reaction is somewhat justifiable.
But this is the same playbook that made Amazon an e-commerce juggernaut. It's extremely difficult to dethrone Amazon once its physical infrastructure reaches a size and scale that enable AI services at the industry's highest capacity and with its lowest prices. The company's Amazon Web Services (AWS) is already the world's leading cloud services platform and the company's main profit center. Amazon is spending now to win the AI war later.
2. AI ambitions go beyond AWS to its retail operations
Amazon is aggressively developing physical AI, such as robotics technology. Imagine a future where machines, not humans, pick orders in distribution centers, and drones and humanoid robots deliver packages to customer doorsteps. Amazon spent $109 billion on fulfillment in 2025. Its North America segment, which excludes AWS, had an operating margin of 6.9%.
NASDAQ: AMZN
Key Data Points
Even a 10% to 20% cost savings from physical AI would mean billions of dollars flowing to Amazon's bottom line. That increased efficiency could open the door for Amazon to grab even more retail market share, as e-commerce is still just 16.6% of total retail spending in the United States. There may not be a company better positioned than Amazon to monetize both cloud AI and physical AI over the next decade.
Why buy now rather than later?
As these early-stage AI investments generate revenue, Amazon's cash flow should recover and eventually reach new heights.
Of course, Amazon has additional growth opportunities beyond retail and AWS. Its advertising business has become an industry giant. Alexa voice assistant has approximately 78 million users in the United States. And last but not least, Amazon Prime generates recurring subscription revenue from an estimated global base of more than 220 million subscribers and is a robust distribution channel for new products or services.
Now, when the stock is down, is the time to buy. Once Amazon's financials begin to show this turn, it will likely already be too late.
