By Angela Palumbo

Amazon.com stock has had a rough start to the year. That could present a buying opportunity to those who think massive artificial intelligence spending will pay off.

Even with the Amazon's nascent rebound this week, the stock has fallen 9.2% over the past 12 months, compared with the 13% increase of the tech-heavy Nasdaq Composite. And since the Feb. 5 earnings report -- when Amazon's earnings miss and major AI spending commitments spooked investors -- the stock has dropped 7.5%.

A major concern among investors is that megacap tech companies are spending hundreds of billions of dollars to build out their AI infrastructure, but have yet to see major returns on those investments. Amazon plans to invest about $200 billion in capital expenditures in 2026, a big jump from $131.8 billion in 2025, and its fourth-quarter earnings of $1.95 a share were slightly short of Wall Street estimates.

But these AI spending jitters also create an opening to jump in to Amazon stock, which is trading at 25.8 times earnings expected over the next 12 months -- below its five-year average of 48.1 times. In a note Wednesday, Morgan Stanley's Brian Nowak reminds clients that Amazon already has an incredibly strong business that will benefit from increased capex: Amazon Web Services.

He has Amazon as a top pick, and says the company's AWS cloud segment is an "under-appreciated" generative-AI winner.

Nowak points to demand for Amazon's cloud services as a boon for the company's growth. Management said on the Feb. 5 earnings call that its backlog -- future contract obligations -- is $244 billion, a 40% increase from the previous year.

However, Nowak notes that Amazon, just like other cloud providers, is capacity constrained. Opening more data centers to meet demand will help the company grow even more, he said. That isn't a cheap endeavor.

"This is why we are bullish [on] this ramping AWS capex," Nowak wrote. He rates Amazon as Overweight with a $300 price target, implying gains of more than 45% from current levels.

In fact, most Wall Street analysts still view Amazon as a buy, even with its steep AI spending: Of the 72 analysts surveyed by FactSet, 66 say the stock is a Buy, and six say it's a Hold.

Still, tech companies that have been viewed as reliable free cash flow generators are also now seeing a change to their balance sheets because of these investments. Amazon said in February that free cash flows for the 12 months leading into the fourth quarter were $11.2 billion, down from $38.2 billion in the prior year period.

Jeff Buchbinder, chief equity strategist for LPL Financial, wrote Feb. 12 that he expects investors to keep a close eye on free cash flow outlooks in coming earnings reports, as AI capex will remain a theme going forward.

"Nonetheless, consensus forecasts still reflect positive, but volatile, cash flow growth ahead," Buchbinder added.

Perhaps investors are starting to renew their faith in the e-commerce and cloud-computing behemoth. Amazon stock closed in the green on Tuesday, snapping a nine-session stretch of straight losses. That was the longest losing streak for the stock since July 14, 2006, according to Dow Jones Market Data.

Shares jumped again on Wednesday, up about 2% to $204.79. This rise came even after a 13-F filing Tuesday night showed that Berkshire cut its position in Amazon by 80% to 2.3 million shares.

Write to Angela Palumbo at angela.palumbo@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 18, 2026 16:11 ET (21:11 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.