Amazon Stock Surges 24% in Biggest Rally in Months -- 3 Reasons AMZN Is a Great Buy Right Now
Key Points
AI is driving impressive growth for Amazon Web Services, which is a key profit generator.
Amazon's success will continue to be supported by its wide economic moat.
Investors don't need to pay a steep valuation to add this winning stock to their portfolios.
- These 10 stocks could mint the next wave of millionaires ›
At a market capitalization of $2.8 trillion, Amazon (NASDAQ: AMZN) is a massive corporation that doesn't fly under the radar. However, its shares can still surprise investors to the upside, as big returns can happen in short order.
Since the start of April, this "Magnificent Seven" stock has surged 24% (as of May 19), marking a dramatic rise that's drawing investor enthusiasm. Despite that tremendous gain, here are three reasons Amazon remains a great buying opportunity, as it trades 6% off its peak right now.
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Image source: The Motley Fool.
1. AI is supporting robust cloud demand at Amazon
During the first quarter, Amazon Web Services (AWS), the company's industry-leading cloud computing platform, posted 28% year-over-year revenue growth. It was the fastest increase in 15 quarters.
Investors can thank the rise of artificial intelligence (AI). "We have never seen a technology grow as rapidly as AI," CEO Andy Jassy said on the Q1 2026 earnings call. "Amazon is already a leader, and companies continue to choose AWS for AI."
Jassy added that AWS has $364 billion in customer backlogs, not including a recent $100 billion deal with Anthropic. This is a clear indication of robust cloud demand. It makes sense that Amazon plans $200 billion in capital expenditures in 2026 to build the technical infrastructure to meet its customers' needs.
From a financial perspective, this is arguably the most important segment for the overall business. AWS generated $14.2 billion in operating income in Q1, accounting for 59% of the company's total.
2. Numerous factors lead to a wide economic moat
Amazon's past (and future) success will continue to be supported by its wide economic moat. There are multiple factors investors should think about.
- The company's scale gives it a cost advantage, especially for its e-commerce logistics operations, as well as AWS.
- AWS puts up huge profits today because it's able to leverage sizable earlier investments with its massive revenue base.
- The online marketplace benefits from a network effect, as it brings greater value to merchants and shoppers the bigger it becomes.
- AWS clients also deal with switching costs. Once these businesses set up their workflows, changing providers is a daunting task.
Thanks to its moat, Amazon's competitive position is so strong that it faces virtually no threat of disruption.
3. Amazon's valuation is reasonable
The final reason this tech stock is a great buy right now is because of its valuation. Despite Amazon's share price soaring 24% over the past seven weeks, the market isn't asking investors to pay a pretty penny.
Amazon trades at less than 19 times trailing operating cash flow. This is much cheaper than the trailing five- and 10-year averages. And it makes buying the stock today look like a smart move.
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*Stock Advisor returns as of May 22, 2026.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
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