Amazon (AMZN +15.32%) certainly makes the short list of the best-performing stocks so far this century. Over the past two decades, shares have risen 12,350% (as of June 29). You would have over $1.2 million today if you made a hypothetical $10,000 investment in late June 2006.
The "Magnificent Seven" stock currently trades 13% off its peak, which can be viewed as an attractive entry point to acquire a disruptive enterprise with a strong position in online shopping, digital advertising, and cloud computing.
It's a good idea not to rush, though. Don't buy Amazon shares until you read this first.
Image source: The Motley Fool.
Pouring money into AI investments
When Amazon announced its 2025 fourth-quarter financial results in February, what caught the market's attention was that the company upped its guidance for capital expenditures (capex). It plans $200 billion in capex in 2026, up from $131 billion last year.
The business is one of the hyperscalers; its Amazon Web Services (AWS) segment is the leading cloud computing platform in the world. The company is seeing robust demand from AWS customers, with a backlog of $364 billion as of March 31 (excluding the $100 billion Anthropic deal). This is leading to a surge in capital deployment.
NASDAQ: AMZN
Key Data Points
"This primarily relates to AWS and generative AI, as we invest to support strong customer demand," chief financial officer Brian Olsavsky said on the first-quarter 2026 earnings call when discussing his company's capex during the quarter. The business is investing aggressively to build data centers that power the AI revolution.
This is hitting Amazon's free cash flow (FCF). It posted just $1.2 billion in FCF in the past 12 months, down a notable 95% from the year-ago period. And the consensus view among sell-side analysts is that the business will report negative FCF of $10 billion in 2026.
Should the market give this business the benefit of the doubt?
"We believe it to be a massive opportunity with the potential to drive long-term revenue and free cash flow," Olsavsky said on the call when referring to the AI landscape. Management clearly believes all this spending will benefit Amazon well into the future as it builds capacity that it can monetize.
Investors have to ask themselves if they're willing to buy what management is selling. That's the trillion-dollar question. Given the track records of founder Jeff Bezos and current CEO Andy Jassy, it's easy to give Amazon the benefit of the doubt. This company has always prioritized its customers' needs, adopted an extremely long time horizon, and didn't give in to Wall Street's short-term pressures.
This operational DNA is why the stock has performed so well. However, what makes things more complicated is that Amazon has raised more than $80 billion in debt so far in 2026. And we still have more than half of the year left.
It wouldn't be surprising if the market demands a higher return on this AI spending sooner rather than later.
