Key Takeaways:
Amazon.com Inc. has been the worst-performing Magnificent Seven stock over the past five years, gaining just 33% as investors weigh a $200 billion infrastructure bet against a CEO forecast that Amazon Web Services will grow into a $600 billion annual business.
"The market is pricing in execution risk on the capex side while discounting the AWS growth trajectory," said Sarah Lin, US equities analyst at Edgen. "The divergence between Amazon's e-commerce margins and AWS profitability creates a valuation puzzle that won't resolve until the spending cycle delivers visible returns."
Amazon's first-quarter results illustrate the tension. The company reported $181.5 billion in total revenue, with e-commerce contributing $143.9 billion against $134.24 billion in expenses — a thin 6.7 percent margin. AWS, by contrast, generated $37.58 billion in sales, up 28.4 percent from a year earlier, with operating profit of $14.16 billion and a 37.6 percent margin.
The cloud computing division is the centerpiece of Amazon's growth narrative. Grand View Research estimates the global cloud market at $1.1 trillion this year, up from $943 billion in 2025, and projects it will reach $3.35 trillion by 2033, a compound annual growth rate of 16 percent. Chief Executive Officer Andy Jassy said AWS annual sales will reach $600 billion within a decade, implying the division would need to roughly quadruple its current run rate.
That ambition comes at a cost. Amazon spent $131.8 billion on capital expenditures in 2025 and plans to invest $200 billion this year, much of it directed at AI infrastructure including Nvidia Corp. graphics processing units and data center construction. The spending spree has unnerved investors who question whether the returns will materialize before the hardware becomes obsolete — Nvidia's GPU generations turn over every 18 to 24 months.
The stock fell 4.75 percent on June 23 alone as scrutiny of hyperscaler spending intensified, according to Money Morning data. At $234.27, Amazon trades well below its Magnificent Seven peers on a relative performance basis. Nvidia Corp. closed at a record $154.31 on June 24, pushing its market capitalization to $4.84 trillion, while Tesla Inc. dropped 7.4 percent in the same week and Meta Platforms Inc. lost 5.4 percent.
The cloud computing opportunity is real, but the timing of the payoff remains uncertain. Amazon's $200 billion capex plan will take years to generate returns, and in the meantime, the e-commerce business — which generates the bulk of revenue — operates on razor-thin margins. For investors, the question is whether Jassy's $600 billion AWS forecast is a realistic target or a vision that will take longer to realize than the market has patience for.
This article is for informational purposes only and does not constitute investment advice.
