Hedge funds have been increasing their positions in Amazon (NASDAQ: AMZN) in recent times, with the underlying thesis being that the company is undervalued compared to other artificial intelligence and cloud computing companies. This move has been echoed by large funds such as Bill Ackman’s Pershing Square and Appaloosa Management.
One of the main reasons for this shift in investment strategy is the inflated valuations of more pure-play or native AI and cloud computing businesses like Nvidia (NASDAQ: NVDA) and Intel (NASDAQ: INTC). Nvidia currently trades at 18 times trailing sales, while Intel commands a 12x price-to-sales ratio. In contrast, Amazon’s P/S ratio stands at a modest 3.4x, making it a more attractive option for investors looking for value.
Amazon’s unique hybrid structure as an e-commerce platform that also owns Amazon Web Services has contributed to its more reasonable multiples. Despite being relatively flat in 2026 and up just over 7% in the past 12 months, Amazon’s stock is currently trading at less than 4 times sales, making it a compelling investment opportunity.
However, like other AI-related companies, Amazon faces risks related to heavy AI capital expenditures. The company anticipates spending around $200 billion on AI infrastructure this year alone, highlighting the competitive nature of the industry. Nevertheless, Amazon’s strong and diversified business model gives it a competitive edge, which is why hedge funds are increasingly loading up on shares.
In conclusion, while Amazon may have its challenges, its current valuation and market position make it one of the better-priced stocks in the AI and cloud computing space. Investors who are willing to weather the heavy spending on AI infrastructure may find Amazon to be a worthwhile addition to their portfolios.
This article was originally published by The Motley Fool and can be found here.
