Amazon's AI Expansion Takes Toll on Cash Flow, Top Investor Advises Caution

Amazon's stock price has been lagging behind the broader tech market, up only 7.5% in 2026 while the Nasdaq has climbed about 22%. Despite this disconnect, Amazon continues to post robust growth in several important divisions, including a 20% year-over-year increase in second-quarter revenue and a 37% jump in AWS sales to $42.2 billion.

The tech giant is investing heavily in its AI expansion, with expected 2026 cash capital spending reaching around $220 billion. This has led to negative trailing-12-month free cash flow of $7.6 billion, despite operating cash flow reaching $161.4 billion.

Investor Oliver Rodzianko, who ranks among the top 1% of stock experts on TipRanks, remains enthusiastic about Amazon's longer-term prospects but advises investors to hold their horses before committing more money at current levels.

Rodzianko notes that while Amazon is one of the best businesses in the world, it may not be the most shrewd entry point currently. He suggests building a starter position rather than committing to a full position immediately, citing valuation as a key concern.