Amazon shares lag behind in stock market obsessed with AI

(Bloomberg/Subrat Patnaik and Ryan Vlastelica) — In a stock market obsessed with artificial intelligence, Amazon.com Inc. is losing ground.

The company’s shares have been lagging the Nasdaq 100 Index for most of the year, and the gap has only widened in the two weeks since Amazon’s July 31 earnings disappointment. The tech-heavy benchmark is up 12% this year, more than twice Amazon’s 4.6% gain.

The shares are in the bottom half of Nasdaq 100 performers this year and they now trade near their biggest discount to the index on record, after spending most of the past two decades priced at a significant premium. Amazon is trading at about 26 times forward earnings estimates, compared with more than 27 times for the Nasdaq 100.

The culprit for the latest decline was weaker-than-expected growth in Amazon’s cloud-computing business, which sparked concerns that it’s losing market share. It was one more concern for investors frustrated that Amazon’s AI investments aren’t doing enough to lift its financial results, the way they are for other tech giants like Microsoft Corp. and Meta Platforms Inc.

Wall Street pros are even turning the company’s traditional strength, the diversity of its businesses, against it, saying that Amazon’s stock price is being held back by not being strictly an AI investment.

“For a lot of investors, Amazon just isn’t a pure-play way to play a theme you believe in,” said Eric Clark, portfolio manager of the Rational Dynamic Brands Fund. “People want purity in their investments. And if you want that, Amazon looks like a company that’s watered down by all the different businesses.”

Amazon still gets the majority of sales from e-commerce, but its aggressive investments in a wide range of businesses, from Amazon Web Services to Whole Foods, have long made the stock attractive to growth-minded investors. Last week, Amazon said it plans to more than double the number of cities where it offers same-day grocery deliveries.

But with AI now dominating the conversation on Wall Street, that model is suddenly less appealing.

While Amazon Web Services remains the leader in the business of renting computing power, its 17% revenue growth in the second quarter was dwarfed by smaller rivals. Sales at Microsoft’s Azure unit were up 39% and Google Cloud’s sales rose 32%.

In addition to Microsoft and Meta, investors have bid up the shares of Oracle Corp. and CoreWeave Inc., which are investing heavily to beef up AI computing capacity. Oracle recently took another major step into AI computing services, cutting a deal with OpenAI last month to supply 4.5 gigawatts of additional data center power in the US, and its stock price is up almost 50% this year. Nvidia-backed CoreWeave, which provides cloud computing services, has seen its shares more than double since its March initial public offering.

“This new cohort of hyperscalers are going to be the companies we’re talking about in five years time,” said Clare Pleydell-Bouverie, co-manager of the Liontrust Global Innovation team. “We’re not seeing the same AI induced acceleration” from Amazon.

Still, many investors remain confident that Amazon’s investments will pay off in the long run by improving efficiency and customer targeting across its businesses. The stock remains one of the most popular on Wall Street, with more than 90% of the 82 analysts who cover it rating it a buy — and none recommending selling. That’s a higher buy percentage than Meta or Alphabet Inc., according to data compiled by Bloomberg.

For Clark, Amazon looks “under-appreciated” right now, but it’s only a matter of time until its AI investments start boosting its bottom line, especially in cloud computing.

“It isn’t a good idea to bet against AWS,” he said.

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–With assistance from David Watkins and Brandon Harden.

(Updates stock move in paragraph two.)

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Originally Published: August 19, 2025 at 9:46 AM PDT