Amazon's Mysterious Low Valuation: Can It Recoup Its $220 Billion Bet?

Amazon's stock price has been puzzling investors due to its low valuation despite a 20% net sales growth in the second quarter of 2026. This growth is an improvement from the previous year, but the company's forward P/E ratio has fallen to just 22. One reason for this low valuation may be Amazon's capital expenditures (capex), which have strained its balance sheet and turned its free cash flow negative.

Amazon announced that it would increase capex spending for the year to $220 billion, up from the $200 billion estimate in the prior quarter. This comes after the company spent almost $132 billion in 2025 on AI infrastructure, which has led to a significant strain on its financials. The company's long-term debt increased by 96% over the previous year to almost $129 billion.

Despite these concerns, Amazon's net sales growth has accelerated, and the company's continued growth and high liquidity have attracted investors to the stock. In fact, Amazon's stock hit a new all-time high following the Q2 earnings release. However, investors may be hesitant to buy due to the uncertainty surrounding Amazon's ability to recoup its massive investment in AI infrastructure.