Amazon Has Been Lagging the S&P 500 in 2026. This Is the Only Reason I'd Need to Buy the Stock in August Without Hesitation.

Amazon (AMZN +1.33%) stock has trailed the S&P 500 for most of 2026 and is now in line with the large-cap benchmark, up 12% year-to-date.

There are several reasons Amazon’s stock has lagged for most of this year, but there is one major reason investors should buy it now in August.

Amazon stock is trading at one of its lowest valuations in a long time. Its current P/E ratio is 21, and other than a dip to 19 in June of this year, it hasn’t been this low in at least 10 years, but likely much farther back than that.

AMZN PE Ratio data by YCharts

That right there is enough to signal a strong buy on Amazon stock. Any time one of the largest, most successful companies in the world, one of the Magnificent Seven stocks, is trading at a decade-low valuation, the buy sign should be flashing.

In Amazon’s case, it is the leader in both of its major markets: e-commerce and cloud computing. It’s just a no-brainer buy right now.

A massive $496 billion backlog

The dirt cheap valuation is the number one reason to buy, but also, Amazon is heading back in the right direction after a bumpy start to the year.

One of the chief concerns about Amazon was its massive increase in spending on artificial intelligence. At the start of the year, Amazon proposed a whopping $200 billion in capital expenditures to maintain the huge demand for AI infrastructure. That’s some 51% more capex spending than in 2025.

Investors balked, as Amazon had been steadily losing market share to Microsoft (MSFT +0.84%) and Google, owned by Alphabet (GOOG +0.83%) (GOOGL +0.94%), so they questioned whether more spending was the answer, particularly given its cash-flow depletion.

But Amazon officials argued that the infrastructure was necessary to regain lost market share and meet demand from its growing backlog of $496 billion in contracts. In fact, CEO Andy Jassy said on the Q2 call that Amazon now projects $220 billion in capex in 2026.

“Even at that amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027, too,” Jassy said on the call.

Analysts are bullish on Amazon

The investments may already be paying off as Amazon reported blowout second-quarter earnings. Amazon Web Services, its cloud computing business, had its fastest growth in more than four years with revenue rising 37%. Overall revenue increased 20%.

Further, its operating income soared 43% to $27.5 billion while net income increased 243% to $62.6 billion, boosted by its investments in Anthropic.

Amazon anticipates sales to rise 9% to 12% year over year in the third quarter and operating income to be between $22.5 billion and $26.5 billion, up 29% at the midpoint.

That’s not quite the growth rate Amazon saw in Q2, but at that low multiple, Amazon stock is just too attractive to pass up with its massive earnings power and growing backlog. Wall Street is almost unanimously in agreement, with 97% of analysts rating it a buy and a median price target of $327 per share. That suggests 27% upside for Amazon stock.