For years, Amazon.com Inc. stood as one of the market’s most reliable growth stories. But in today’s AI-obsessed environment, the company’s shares aren’t keeping pace. Investors who once prized Amazon’s diversification now appear to see it as a liability, especially compared with competitors whose businesses are more directly tied to artificial intelligence.
Amazon’s Stock Underperforms
So far this year, Amazon’s shares have lagged well behind the broader tech-heavy Nasdaq 100 Index. The benchmark is up roughly 12%, while Amazon has managed only about 4.6%. The gap grew wider after the company’s July 31 earnings, which disappointed Wall Street. At present, Amazon’s stock sits in the lower half of Nasdaq 100 performers and trades near its steepest discount to the index on record.
Historically, Amazon commanded a consistent premium valuation. Today, it trades around 26 times forward earnings estimates — slightly lower than the index average of about 27 times. That shift is symbolic: investors no longer grant Amazon the benefit of unquestioned long-term growth.
Weakness in AWS Raises Concerns
Much of the recent unease comes down to Amazon Web Services (AWS). Long the crown jewel of the company, AWS reported weaker-than-expected growth last quarter. Its 17% revenue increase looks modest next to Microsoft’s Azure at 39% and Google Cloud’s 32%. For a business once viewed as untouchable, the slowdown raised fresh doubts about whether AWS can maintain its edge as competitors double down on AI infrastructure.
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That disappointment cut deeper because investors have been watching AI investments drive results elsewhere. Microsoft and Meta Platforms, for instance, have both successfully tied their financial growth to the AI narrative. Amazon’s efforts — while significant — haven’t yet translated into the same kind of clear market upside.
The Problem of “Too Much Business”
Ironically, Amazon’s very diversity, often considered its biggest strength, may now be weighing on its stock. The company still generates most of its revenue from e-commerce, while also spreading resources across AWS, grocery delivery, and even physical retail through Whole Foods.
Some fund managers argue that this broad portfolio dilutes Amazon’s appeal for those seeking pure AI plays. As Eric Clark, portfolio manager at Rational Dynamic Brands Fund, put it: “For a lot of investors, Amazon just isn’t a pure-play way to play a theme you believe in. People want purity in their investments.”
That perception matters in an environment where investors reward companies seen as tightly focused on AI — and punish those viewed as distracted.
Competitors Winning the AI Race
The competitive backdrop isn’t helping. Oracle has surged nearly 50% this year after announcing a major deal with OpenAI to provide massive data center power. Nvidia-backed CoreWeave, a smaller but fast-growing cloud provider, has more than doubled in value since going public in March. Both firms, alongside Microsoft and Google, are positioning themselves as crucial infrastructure players for AI’s future.
By comparison, Amazon doesn’t appear to be enjoying the same “AI premium.” As one analyst noted, these hyperscalers could well become the names investors are still talking about five years from now — unless Amazon finds a way to reassert itself.
Still a Wall Street Favorite
Despite the headwinds, Amazon hasn’t lost its shine completely. More than 90% of analysts covering the stock still rate it a buy, and not a single major analyst currently recommends selling. That bullish consensus is stronger than for peers like Meta or Alphabet. The optimism rests on a simple idea: even if Amazon is late to the AI-driven rally, its scale and reach almost guarantee it will eventually benefit.
In fact, Amazon has begun integrating AI more deeply across its ecosystem, from optimizing logistics to enhancing advertising targeting. Many believe AWS, in particular, is poised to capture significant AI-related demand once its current growth lull stabilizes.
A Stock Waiting for its Turn
For now, though, Amazon seems caught between narratives. It’s neither a straightforward AI play nor a company Wall Street is willing to overlook simply because of its size. That leaves it in a rare position: underappreciated by the market but still trusted by analysts.
Investors like Clark suggest it’s unwise to bet against AWS in the long run. The cloud business remains the leader in its field, and Amazon’s track record of turning investments into durable advantages shouldn’t be underestimated. At the same time, in a market where attention has shifted so dramatically toward AI, patience may be required before Amazon’s own initiatives start driving its valuation higher.
Closing Thought
Amazon may not be the market’s AI darling today, but writing it off would be premature. The company’s sprawling empire can sometimes look messy, but that complexity also provides resilience. If AI is truly the defining trend of the decade, it’s difficult to imagine a future where Amazon isn’t playing a significant role. For investors, the question isn’t whether Amazon will benefit from AI, but when the payoff will finally show up in the stock price.
Source: bloomberg.com
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