3 Reasons to Buy Amazon Stock Like There's No Tomorrow

The S&P 500 is making its way back up from a tariff-included plummet, but not all of its stocks are doing as well. Amazon (NASDAQ: AMZN) stock is down 8% year-to-date on May 22, as investors continue to worry about how the company will be affected by tariffs.

CEO Andy Jassy addressed how the company could be affected and how it's responding during the first-quarter earnings call on May 1, which was prior to the easing of tariffs on May 12. He noted several points in Amazon's favor. Most of its e-commerce sales are the small, cheaper essentials that people have to buy anyway. It has a huge selection, so customers should still be able to find what they need on the platform, even if they switch brands or sellers. During times of uncertainty, customers are also likely to buy from a retailer they trust, and Amazon has built up experience-based trust with its hundreds of millions of Prime members and other shoppers.

The market took that with a grain of salt. Retailers are sending mixed messages about how they're going to manage with higher tariffs, and investors are waiting to see how the fees will affect Amazon's performance.

In the meantime, at the lower price, Amazon stock looks priced to buy. It trades at a historically cheap price-to-earnings ratio of 33, and it still has big opportunities.Here's why.

1. E-commerce is still increasing as a percentage of retail

Amazon is a lot of things these days, but its main business is still e-commerce, which accounts for around 60% of its sales. E-commerce is still a relatively small portion of the American (and global) economy's total retail sales. Online sales accounted for 21.4% of U.S. retail sales in 2024, according to eMarketer, and are expected to reach 23% by 2027. Each of those percentages translates into many billions of dollars, and that trend should keep moving higher. As the leader in the industry, with about 40% of the U.S. market, a huge amount of that growth should land in Amazon's market-leading lap.

Image source: Getty Images.

The company makes moves all the time to keep its lead and even expand it. It's always adding new brands to the marketplace. It is expanding with a greater focus on luxury, with a recent partnership with iconic luxury retailer Saks Fifth Avenue. After the success of its regional warehouse rollout, which puts more products closer to more customers, it's now renovating its inbound channels to keep the warehouses fully stocked at cost-efficient rates. Every quarter, Amazon has been beating its own records for delivery speed, and it delivered the most same-day shipments ever in the first quarter of 2025.

There could always be disruptors, but that's a small risk for Amazon. The company's lead is so wide, and it has the best technology to innovate, that it would be extremely challenging for smaller rivals to truly compete with it.

2. It's just getting started in AI

Amazon offers a large assortment of generative artificial intelligence (AI) services through the Amazon Web Services (AWS) cloud platform. It reaches every level of need, from building blocks for developers through plug-in tools for small businesses. Although it offers access to large language models (LLMS) like ChatGPT, it also has its own LLMs. As with most things, Amazon's solution is competitive on price. It's also creating its own graphics processing units (GPUs) that are cheaper to use, even though it also has a partnership with Nvidia.

Jassy likes to expound on the opportunity in generative AI, explaining that there's going to be a shift as more companies move their operations into the cloud instead of on the premises, where about 85% of operations are today. He envisions a time coming soon where generative AI is built into every app, and Amazon is investing in the technology to benefit from these shifts.

"Before this generation of AI, we thought AWS had the chance to ultimately be a multi-hundred billion dollar revenue run rate business," he said on the Q1 earnings call. "We now think it could be even larger."

3. There are other businesses on the horizon

Amazon has several business categories outside of e-commerce and AWS. Its fastest-growing business is advertising, which increased 19% year over year in Q1. In addition to the ads on its marketplace, which it has had for years, it now also has ads on its ad-supported streaming tier. It's expanding its Prime streaming with new, high-level content, and it recently purchased the rights to the James Bond franchise.

Some of its other businesses include Zoox autonomous vehicles and its growing pharmacy business, and it's making progress on Project Kuiper, its broadband satellite initiative.

Between its dominant position in two growth industries and the smaller businesses on the horizon, Amazon has tremendous long-term opportunities. I don't want to downplay the potential effect of tariffs on border-crossing goods, but whatever happens with them, it should be a short-term effect that doesn't negate Amazon's incredible long-term potential.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.