The Smartest Growth Stock to Buy With $500 Right Now

Amazon (NASDAQ: AMZN) stock hasn't been so magnificent over the past year. The stock price is down roughly 11% year to date and has dropped 12% over the past 12 months.

But that creates an excellent buying opportunity for investors to grab the mega-monster stock at the cheapest valuation it has been at in years.

Amazon stock is currently trading at around 28 times earnings, and that's the lowest it's been since the early 2010s, save for a quick dip lower in April 2025 when President Trump's tariffs were rolled out.

Image source: Getty Images.

Wall Street analysts are almost in unanimous agreement on Amazon stock, as 92% rate it a buy, with a median price target of $285 per share. That would suggest a 39% return over the next 12 months.

These are just some of the key reasons why Amazon stock is a great buy right now, even if you can only buy a couple of shares at the current price of $205 per share.

Why Amazon stock has dropped

The reasons that Amazon stock has tanked 11% this year are varied, but many are short-term concerns.

Amazon has two profit centers, the Amazon e-commerce platform and Amazon Web Services. The e-commerce site saw revenue climb about 10% in 2025, on par with the previous year but lower than 2023 and 2022. Investors may worry that it is feeling the effects of the tariffs on its sellers and buyers.

AWS, which is where most of Amazon's profit comes from, grew net sales about 20% and operating income 15% last year. Those are strong numbers, but its two chief rivals, Microsoft and Alphabet, have grown at a faster pace and eaten away at Amazon's leading market share.

On top of this, Amazon reported in the fourth quarter that it was investing $200 billion in capital expenditures (capex) in 2026, mostly into AWS and its AI infrastructure. Amazon is attempting to fend off its rivals by investing even more in AI, but many investors were knocked for a loop by this number. This is more than a 50% increase over 2025 capex spending levels.

This is more than its operating cash flow and will likely further deplete its free cash flow, which already sank 71% in 2025 to $11.2 billion. Further, there is concern the company may have to use debt to fund some of the capex.

Why Amazon is a buy

These are all valid concerns, but ultimately, the capex spending is necessary to secure its market leadership in cloud computing. The investments will be used for data centers to keep up with demand, custom chips, networks, and AI infrastructure in general.

The spending could lead to choppy results in 2026 if margins compress and earnings growth slows. But the stock is already cheap, so investors may buy low in anticipation of the capex paying off in the long run.

Plus, it should be noted that AWS has $244 billion in backlog -- orders in the pipeline -- up 40% from a year ago. So that will drive earnings.

Ultimately, Amazon stock is too cheap to ignore right now, and capex spending by the world's largest cloud computing company, while a short-term concern, is a long-term benefit.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool has a disclosure policy.