Amazon Stock Sell-Off: Should You Buy the Dip?

Core Viewpoint - Amazon's stock is currently experiencing a significant decline, presenting a potential buying opportunity for investors as it trades at one of its cheapest valuations in years [1][2]. Valuation - Amazon's trailing price-to-earnings (P/E) ratio is 31, with a forward P/E of 27, marking a substantial decrease from its historical averages [2]. - Over the past decade, Amazon's average trailing P/E has been 137, with a three-year average of nearly 84, indicating that the current valuation is exceptionally low [3]. Investment Strategy - Amazon has a history of thriving after periods of heavy investment, which has transformed it into a leading e-commerce and logistics company [6][7]. - The company is currently investing heavily in artificial intelligence (AI) and data center infrastructure, planning to allocate $100 billion by 2025 to meet rising demand for AI workloads [9][10]. Business Performance - Amazon's North American and International segments saw a 74% increase in operating income last quarter, driven by strong operating leverage and AI integration [11]. - The advertising services revenue grew by 18% to $17.3 billion, positioning Amazon as the third-largest digital advertiser globally [13]. Cloud Computing - Amazon Web Services (AWS) remains the most profitable and fastest-growing segment, with a 19% revenue increase last quarter, benefiting from AI workload demands [14][15]. - The development of custom AI chips through Annapurna Labs provides Amazon with a competitive edge in performance and cost efficiency [15].