Amazon stock is trading at a record discount. A bargain or a trap?

Amazon shares have fallen to their lowest valuations in a decade and are now trading at the largest discount among the Magnificent Seven. For investors, this could be both a good entry opportunity and a trap. Questions surround the company's AI strategy and the outlook for its AWS cloud division in an increasingly competitive environment.

For investors looking to increase the Big Tech portion of their portfolio, Amazon stock is now a "discount" buy. The company's forward P/E ratio (the ratio of price to expected earnings over the next 12 months) has been falling in recent months. As of Sept. 25, the securities were trading at 29.6 earnings, near a decade low, MarketWatch writes.

The publication notes that while the current valuation is above the 10-year low of 25.3 recorded in April 2025, the stock is markedly cheaper than it has been in recent years. According to Dow Jones Market Data, the average multiple over the past year was 32.5, compared with 36.5 in 2024.

By comparison, Amazon shares were trading at 169.3 in January 2018. Today, the company's securities are valued 42% below their five-year average and 60% below their ten-year average - the largest discount of any member of the Magnificent Seven, MarketWatch adds.

The reason is that many investors believe: the "golden days of growth" for Amazon are over. Market sentiment has worsened due to questions about the company's artificial intelligence strategy and the prospects for its Amazon Web Services (AWS) cloud business as it struggles to keep up with the demand generated by the AI boom.

As a result, Amazon turned out to be the worst stock of the "Magnificent Seven" in 2025: at the end of trading on September 25, securities fell by 1% since the beginning of the year, while the other companies in the group showed growth. At the pre-market on September 26, the shares showed a weak recovery - adding about 0.3%.

Nevertheless, the race for leadership in AI is just beginning, and the winners have yet to be determined, MarketWatch emphasizes. A few months ago, investors feared that ChatGPT would jeopardize Alphabet's future, but today the company's stock is among the best performers among Big Tech, second only to Nvidia.

For investors, Amazon's current low valuation could be a convenient entry point. Jonathan Kofsky, portfolio manager at Janus Henderson, calls Amazon an extremely resilient business with serious potential for success in AI. He says the current share price looks "quite reasonable given the company's position."

AWS is a $123 billion business that continues to grow at double-digit rates and is characterized by scale and high margins. While its growth is still behind cloud competitors Azure from Microsoft and Google Cloud, Wells Fargo analysts predict AWS growth will accelerate thanks to its partnership with AI company Anthropic.

In addition, according to MarketWatch, analysts emphasize Amazon's tremendous experience in retail and logistics. Automation and regionalization of processes can further strengthen this business segment, analysts at Wells Fargo say.

This article was AI-translated and verified by a human editor