Massive investment in AI triggers market concerns. The stock price of Amazon.com, Inc. (AMZN.US) did not have a good start this year, but Wall Street still considers it a "undervalued winner".

Amazon.com, Inc. (AMZN.US) stock had a rough start this year, but in the eyes of some Wall Street professionals, this pullback actually provides a potential buying opportunity for investors who are bullish on long-term returns from artificial intelligence (AI). Even though the stock has shown some initial rebound this week, Amazon.com, Inc. has still accumulated a 9.2% decline over the past 12 months, significantly underperforming the approximately 13% increase of the Nasdaq Composite Index during the same period. Since announcing their financial results on February 5th, concerns in the market have been raised due to lower-than-expected earnings and significant AI capital expenditures, causing Amazon.com, Inc. stock to fall by about 7.5%. Investors are generally worried that tech giants like Amazon.com, Inc. are investing billions of dollars into building AI infrastructure, with the expected returns from these investments not yet fully materializing. The company predicts that capital expenditures will rise to around $200 billion by 2026, a significant increase from $131.8 billion in 2025. Meanwhile, Amazon.com, Inc. reported earnings per share of $1.95 in the fourth quarter, slightly lower than Wall Street expectations, exacerbating market caution. However, this anxiety over AI spending has led to a noticeable decline in Amazon.com, Inc.'s valuation. The stock currently has a forward price-to-earnings ratio of about 25.8, significantly lower than its five-year average of 48.1. Morgan Stanley analyst and head of technology research at the firm Brian Nowak reminded clients in a report on Wednesday that Amazon.com, Inc. already has a strong business, Amazon Web Services (AWS), which directly benefits from capital expenditure expansion. Nowak stated that AWS is a "market underestimation winner" in generative AI and emphasized the continued demand for cloud computing services as a significant driver of growth for the company. During the financial results call on February 5th, management disclosed that the company's backlog of unfulfilled obligations (order backlog) had increased by 40% year-over-year to $244 billion. He also pointed out that similar to other cloud service providers, Amazon.com, Inc. is currently facing capacity constraints. Continued expansion of data centers to meet growing demand will further drive business growth, but it also means high capital investment. "As a result, we continue to be positive about the accelerated expansion of AWS capital expenditures," Nowak wrote. He gave Amazon.com, Inc. a "buy" rating with a target price of $300, implying over 45% upside from the current level. Overall, Wall Street's attitude towards Amazon.com, Inc. remains optimistic. According to FactSet, out of 72 analysts covering the stock, 66 recommend "buy," with only 6 suggesting "hold." However, AI investments are changing the market's view on the cash flow capabilities of tech giants. Amazon.com, Inc. disclosed in February that its free cash flow for the past 12 months ending in the fourth quarter was $11.2 billion, significantly lower than $38.2 billion in the same period the previous year. In a report on February 12th, LPL Financial's chief equity strategist Jeff Buchbinder pointed out that as AI capital expenditures become a long-term theme, investors will pay closer attention to companies' guidance on free cash flow prospects. However, he also added that the market consensus still points towards "positive but volatile cash flow growth." Recent trends show that some investors may have started to rebuild their confidence in this e-commerce and cloud computing giant. Amazon.com, Inc. stock rose on Tuesday, ending a nine-day consecutive decline, the longest since July 2006. The stock continued to rise by about 1.8% on Wednesday, closing at $204.79. It's worth noting that despite the stock rebound, a 13F filing revealed on Tuesday evening showed that Warren Buffett's Berkshire Hathaway (BRK.A.US, BRK.B.US) had reduced its stake in Amazon.com, Inc. by about 80% to 2.3 million shares. However, this news did not prevent a short-term rebound in the stock price.