Amazon Stock Hits Lowest Valuation Despite AI Boom

Amazon (AMZN) is struggling to attract investors despite the current enthusiasm for AI-driven stocks. While peers like Nvidia (NVDA), AMD (AMD), Microsoft (MSFT), Google (GOOG), and Meta (META) have seen significant gains, Amazon's stock has dropped 2.4% over the past month. At $251 per share and a trailing price-to-earnings (P/E) ratio of 20x, Amazon is trading at its lowest valuation since becoming a public company, according to TrendSpider.

Two major factors are contributing to Amazon's sluggish performance. First, the Federal Trade Commission (FTC) and 22 states recently sued Amazon, alleging that its advertising practices have overcharged advertisers by $20 billion since 2019. The FTC claims Amazon failed to disclose pricing mechanisms that increased costs for both advertisers and consumers. Amazon has defended its practices, stating that advertisers benefit from its platform. Investors, however, remain cautious, fearing potential future losses in advertising revenue.

Second, concerns about Big Tech's heavy spending on AI infrastructure are weighing on Amazon's stock. In its second-quarter earnings report, Amazon announced it would increase its 2026 capital expenditures budget to approximately $220 billion. Analysts predict this aggressive spending will continue, with Evercore ISI analyst Mark Mahaney estimating Amazon's 2027 and 2028 capital expenditures at $320 billion and $370 billion, respectively. Mahaney also warns of negative free cash flow of approximately -$50 billion for each of those years.