Amazon's $5.3 Billion Saudi Bet Sparks Market Buzz and Raises Valuation Questions

Amazon's $5.3 billion bet in Saudi Arabia is generating fresh market buzz as its AWS cloud infrastructure region in the Kingdom of Saudi Arabia is on track for launch by December 2026.

The announcement, made at the LEAP conference in Riyadh, reaffirms a multibillion-dollar commitment first unveiled in March 2024 and adds momentum to Amazon's stock, which has already returned 10.6% year-to-date, outpacing both the Zacks Internet, Commerce industry and the Zacks Retail-Wholesale sector.

AWS' expansion into Saudi Arabia is part of a broader wave of AI announcements from Amazon's newsroom this summer, including an expanded partnership with HUMAIN, a Public Investment Fund-owned AI company, to deliver up to 50 megawatts of capacity in Saudi Arabia's first dedicated AI Zone by 2028.

Amazon's expanding presence in the region and its accelerating growth rate justify paying a premium valuation for the stock, analysts say, despite Amazon currently trading at a forward 12-month price/earnings ratio of 22.78X, higher than the industry average.