Is Amazon.com (AMZN) Undervalued As Its Nvidia GPU Bet Lifts AI Spending?
Amazon.com (AMZN) is back under the spotlight after committing to deploy 2 million additional Nvidia GPUs through 2027 and 2028. This long term AI infrastructure push is drawing fresh attention to Amazon’s capital spending plans.
Amazon.com’s expanded Nvidia commitment has arrived during a period of renewed momentum in the stock. The 1 month share price return of 17.55% and year to date share price return of 17.63% point to improving sentiment, while the 3 year total shareholder return of 92.90% and 5 year total shareholder return of 53.21% underline how investors have already been rewarded through a mix of price appreciation and reinvested benefits, even as recent headlines focus on higher AI related capital expenditure and tariff refund tailwinds.
Compare Amazon.com’s AI buildout with other potential beneficiaries of this trend by scanning our curated list of 56 AI infrastructure stocks for your watchlist.
The recent Amazon.com move sits between two stories. One points to tariff refunds and AI excitement. The other points to a business pouring cash into GPUs and power deals. Which one does the current valuation really reflect?
Most Popular Narrative: 43.9% Undervalued
At a last close of $266.43, the most followed Amazon.com narrative suggests a fair value of $475.09. That gap pulls attention straight to the underlying assumptions.
Amazon is a company of two sides: a high tech, high margin side, comprising its AWS, Advertising and subscription services segments, and its more traditionally known low margin, high volume stores and third-party seller segments. These two sides form a cohesive whole. The Amazon online store motivates customers to purchase subscriptions and hosts its advertising. AWS underpins the functioning of the online store, but is also easy to integrate with for Amazon's many third-party sellers, encouraging adoption.
The KiwiInvest narrative focuses on how the high margin side of Amazon might compound, how far margins might stretch, and what profit multiple that might justify. Want to see which specific revenue mix and profitability targets sit behind that $475.09 fair value estimate and how they connect back to AWS, advertising and subscriptions?
Result: Fair Value of $475.09 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, Amazon.com still faces risks if AI infrastructure spending fails to earn adequate returns, or if retail and AWS competition pressures the margins this narrative relies on.
Find out about the key risks to this Amazon.com narrative.
Another View on Amazon.com’s Valuation
The SWS DCF model points to a fair value of $431.07 for Amazon.com, compared with the current share price of $266.43. That implies the stock is priced below this cash flow based estimate. How comfortable are you with a story that leans heavily on long term cash generation?
Look into how the SWS DCF model arrives at its fair value.
Next Steps
With sentiment on Amazon.com split between AI upside and heavier spending, it makes sense to move quickly and test the assumptions yourself. To weigh both sides of the story, start with our breakdown of the 4 key rewards and 2 important warning signs
Looking for more investment ideas beyond Amazon.com?
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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