Amazon Tumbles as $3 Trillion Market Cap Momentum Fades

Amazon's stock price dropped by 1.8% on Tuesday as traders finally took a step back after its blistering post-earnings run. The e-commerce and cloud giant had just reached a market capitalization of over $3 trillion for the first time, thanks in large part to the rapid growth of its Amazon Web Services (AWS) business.

AWS sales surged 37% in the second quarter to $42.2 billion, with an annualized revenue run rate of $169 billion and its fastest growth in 18 quarters. AWS operating income rocketed to $16.6 billion from $10.2 billion a year ago.

Across Amazon, revenue climbed 20% to $200.6 billion while operating income jumped 43% to $27.5 billion. Notably, Amazon's AI business and homegrown chip business have already exceeded an annual revenue run rate of $25 billion.

However, Amazon is spending heavily to stay ahead in the market, with net property and equipment purchases exploding by $66.1 billion over the past 12 months, driven largely by AI infrastructure investments. This has resulted in a swing from positive $18.2 billion to negative $7.6 billion in trailing 12-month free cash flow.

The stock is currently trading at $273.17, which is about 11.35% above its GF Value of $245.33. While Amazon's valuation may not be a bargain, its rapid growth and increasing investment in AI make it an attractive prospect for investors who can stomach the risk.