Amazon Accelerates AI Investment for 2026, Undervalued Compared to Peers
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 07 2026
0mins
Should l Buy AMZN?
Source: Fool
- AI Market Potential: The AI infrastructure market is projected to reach $4 trillion by 2030, and Amazon's investments in this area are expected to yield significant benefits in the coming years, despite current global market tensions.
- Cloud Computing Growth: Amazon's AWS generated $33 billion in revenue in Q3 2025, marking a 20% year-over-year increase, which underscores its leadership position in the global cloud computing market and will further drive overall company performance.
- Increased Capital Expenditures: Amazon's capital expenditures on AI infrastructure reached $115.9 billion in Q3 2025, while free cash flow fell to $14.78 billion; however, these investments are set to lay the groundwork for future growth.
- Trainium Chip Launch: The launch of Amazon's Trainium3 chip in December allows for cost reductions in AI tasks, enabling developers to save up to 40% compared to using Nvidia chips, thereby enhancing Amazon's competitive edge in the AI sector.
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Analyst Views on AMZN
Wall Street analysts forecast AMZN stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for AMZN is 294.69 USD with a low forecast of 250.00 USD and a high forecast of 340.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
47 Analyst Rating
46 Buy
1 Hold
0 Sell
Strong Buy
Current: 222.690
Low
250.00
Averages
294.69
High
340.00
Current: 222.690
Low
250.00
Averages
294.69
High
340.00
About AMZN
Amazon.com, Inc. provides a range of products and services to customers. The products offered through its stores include merchandise and content it has purchased for resale and products offered by third-party sellers. The Company’s segments include North America, International and Amazon Web Services (AWS). It serves consumers through its online and physical stores and focuses on selection, price, and convenience. Customers access its offerings through its websites, mobile apps, Alexa, devices, streaming, and physically visiting its stores. It also manufactures and sells electronic devices, including Kindle, Fire tablet, Fire TV, Echo, Ring, Blink, and eero, and develops and produces media content. It serves developers and enterprises of all sizes, including start-ups, government agencies, and academic institutions, through AWS, which offers a set of on-demand technology services, including compute, storage, database, analytics, and machine learning, and other services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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See More
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- Changing Consumer Behavior: CEO Andy Jassy noted that consumers are becoming more price-conscious, seeking bargains, which could lead them to shop at alternative retailers, potentially impacting Amazon's market share.
- Long-term Growth Prospects: Despite the challenges posed by tariffs, Amazon still possesses strong long-term growth potential, with a robust business model and solid cash flow that position it well to navigate economic slowdowns.
- Reasonable Market Valuation: With a market cap of $2.6 trillion, Amazon may seem expensive, but its forward P/E ratio of 29 indicates that the stock is not egregiously overvalued, making it a solid long-term investment choice.
See More
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- Market Reaction: The disappointing earnings results led to a negative reaction in the market, affecting investor confidence in the company's performance.
See More
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- Strong Sales Growth: Amazon's fourth-quarter net sales rose 14% year-over-year to $213.4 billion, with advertising sales jumping 23% to $21.3 billion, demonstrating robust performance in both e-commerce and advertising, further solidifying its market leadership.
- Cloud Business Thrives: Amazon Web Services (AWS) generated $35.6 billion in sales with a growth rate accelerating to 24%, and full-year sales and operating income projected at $128.7 billion and $45.6 billion for 2025, indicating that cloud computing has become a crucial profit driver for the company.
- Capital Expenditure Concerns: Amazon's forecast of $200 billion in capital expenditures for 2026 significantly exceeds its operating cash flow of $139.5 billion over the past twelve months, raising investor concerns and contributing to a stock price drop of over 5%.
- Cautious Future Outlook: Amazon anticipates net sales growth of 11% to 15% for the first quarter of 2026, projecting between $173.5 billion and $178.5 billion, yet investor apprehension regarding its aggressive spending strategy may impact future stock performance.
See More
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- Infrastructure Bottlenecks: Pichai emphasized that factors such as power availability, land, and supply chain issues have emerged as critical bottlenecks for Google's data center expansion, impacting the company's growth potential in the AI sector.
- Strong Financial Performance: Alphabet reported fourth-quarter revenue of $113.83 billion, exceeding market expectations of $111.31 billion, reflecting an 18% year-over-year growth driven by robust performance across all business segments.
- Future Investment Plans: The company anticipates capital expenditures ranging from $175 billion to $185 billion by 2026, primarily aimed at expanding AI computing capacity and strengthening technical infrastructure to support cloud growth.
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