Amazon Stock Traded at Low Valuation Amid Heavy Capex Spending

Amazon's stock price has been puzzling investors with its low valuation despite a 20% net sales growth in recent years. The company's forward P/E ratio has fallen to just 22, a level that would have been unimaginable in Amazon's earlier years.

The likely reason for this low valuation is Amazon's heavy capital expenditures (capex), which have strained its balance sheet and turned its free cash flow negative. In the second quarter of 2026, Amazon announced it would increase capex spending to $220 billion, up from the $200 billion estimate in the prior quarter, due to an unprecedented shortage of memory chips.

Amazon spent almost $132 billion on capex in 2025, and its long-term debt increased by 96% over the previous year to almost $129 billion. This has left investors questioning whether Amazon can recoup this massive investment in AI infrastructure.