Already three days into the week, it has been headline making for some big, noteworthy AI centric tech names.
Nvidia (NVDA) touched a record high. Rival AMD (AMD) just hit a record high. Marvell Technology (MRVL) lifted its revenue outlook by billions of dollars, and struck a bullish note on the size of its long-term total addressable market.
How much is Amazon spending on AI infrastructure?
How does Amazon compare to other Magnificent Seven stocks?
Why is Amazon trading at its lowest valuation ever?
What FTC lawsuit concerns are affecting Amazon’s stock?
Then we have a tech behemoth like Amazon, which has not hit a record high. The AWS purveyor’s shares are down 8.5% from their early August 52 week highs. By comparison, Azure owner Microsoft (MSFT) shares are down 4.2% from their 52-week high.
Interestingly, at its current trailing price-to-earnings (P/E) ratio of 20x, Amazon is trading at one of its lowest multiples in years, the team at online trading and investor eductation platform TrendSpider pointed out in their analysis below.
It’s unclear if TrendSpider’s calculations reflect the massive investment gain in the second quarter from Amazon’s investment in Anthropic (ANTH.PVT). A request for comment from TrendSpider wasn’t immediately returned.
Yahoo Finance AlphaSpace data shows Amazon shares trading on a trailing P/E ratio of 20x. This is below the five-year average trailing P/E ratio on Amazon of 60x and below the 10-year average of 102.3x, according to Yahoo Finance AlphaSpace data.
Amazon has the second-lowest trailing P/E ratio among the “Magnificent Seven” names. Only Alphabet trails, at 17.7 times forward earnings, per Yahoo Finance AlphaSpace data.
There are a couple of factors likely holding Amazon’s stock back.
For starters, in early September, the Federal Trade Commission (FTC) and 22 states filed a lawsuit alleging that Amazon’s advertising practices have overcharged its roughly 1.2 million advertisers by $20 billion from 2019 to the present.
The FTC contended Amazon didn’t disclose reserve-pricing mechanisms that ultimately increased costs for advertisers and consumers.
Amazon responded by saying advertisers are receiving greater value from its platform.
Whatever the case, there may be fears that a lucrative profit center for Amazon — advertising — could become less lucrative in the future.
Lingering concerns about how much Big Tech is spending on AI infrastructure are also not helping Amazon’s stock.
Dive deeper into Big Tech’s AI spending plans:
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Big Tech is about to spend trillions to dominate the AI era
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Tech’s AI debt boom, in one chart
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Google raises capex growth expectations again
Recall that in its second quarter earnings release, Amazon announced it is significantly expanding its full-year 2026 capital expenditures budget to approximately $220 billion.
And the aggressive spending is poised to continue, Wall Street says.
EvercoreISI tech analyst Mark Mahaney estimates Amazon’s 2027 capex to be $320 billion, and its 2028 capex to be $370 billion. He estimates Amazon will have negative free cash flow in 2027 and 2028 of approximately $50 billion in each year.
To expand its valuation, Amazon will likely have to keep showing its more than just an online retailer with a big cloud business. It can be done, pros say.
“We believe Amazon is evolving from the world’s largest online retailer and cloud provider into the infrastructure layer for enterprise AI, with the AWS and Anthropic partnership providing the clearest expression of that opportunity. AWS is not simply renting accelerators; it is building the full stack on which frontier models are trained and deployed, from custom Trainium silicon and the Project Rainier compute clusters to Bedrock, the managed layer through which enterprises access Claude and other models inside their existing AWS security, data, and billing footprint,” Yorkville Ives partner Dan Ives said in a note.
https://finance.yahoo.com/markets/stocks/article/amazon-stock-is-trading-at-its-lowest-trailing-pe-ratio-in-years-despite-ai-boom-000819389.html?shem=aimgspe%2C
