Amazon (Nasdaq: AMZN) is being left out of the renewed rush into AI stocks. At about $251 a share, the stock trades at roughly 20 times trailing earnings, its lowest valuation ever as a public company, and it is down about 2.4% over the past month. The move comes just two months after Amazon crossed $3 trillion in market value on the strength of its cloud business.
The contrast with other AI names is sharp. Nvidia is trading at a record high, and AMD just set a record of its own. Meta shares have surged 23% in the past month on enthusiasm for its Muse AI agent, while Microsoft and Alphabet have posted modest gains. Among the Magnificent Seven, only Alphabet screens cheaper than Amazon.
Two issues appear to be holding the stock back. The first is legal. In early September, the Federal Trade Commission and 22 states sued Amazon, alleging its advertising practices overcharged roughly 1.2 million advertisers by about $20 billion between 2019 and today. The agency says Amazon did not disclose reserve-pricing mechanisms that raised costs for advertisers and consumers. Amazon says advertisers are getting greater value from its platform. These are allegations, not findings, but investors are wary that advertising, one of Amazon’s most profitable businesses, could become less lucrative.
The second issue is spending. Amazon’s second-quarter report raised its 2026 capital expenditure plan to approximately $220 billion. One Wall Street estimate now puts 2027 capex at $320 billion and 2028 at $370 billion, which would push free cash flow to roughly negative $50 billion in each of those years. Those are outside estimates, not company guidance. In August, the stock jumped more than 15% in a single session because AWS growth appeared to justify the spending. Now attention is shifting to how much cash the buildout consumes, the same debate that has weighed on Oracle and other heavy AI spenders.
A low multiple is not automatically a bargain. The bull case rests on AWS, which posted $42.2 billion in quarterly revenue, up 36.7% from a year earlier, with a contracted backlog of $496 billion and management saying demand still outstrips available server capacity. The bear case rests on litigation risk, rising capital intensity, and the possibility that free cash flow stays negative for years. The valuation simply shows which argument investors currently find more persuasive.
For small and microcap investors, the lesson is that even the world’s largest companies are priced on narrative as much as fundamentals. Capital is flowing toward stocks tied to the AI storyline while discounting those carrying heavy spending or regulatory overhang. Smaller suppliers of power, cooling, and components into data center buildouts benefit from Amazon’s spending whether or not its stock rewards it, but they also depend on that spending continuing if its cash flow tightens. Valuation gaps like this one are also a reminder that investor attention can leave fundamentally strong companies undervalued, something smaller companies experience more often than most.
