Amazon's Stock Dropped 11% After Its AI Spending Announcement. Here's Why That's a Buying Opportunity in 2026.

Wall Street first gasped, then smashed the sell button when Amazon (NASDAQ: AMZN) reported its fourth-quarter 2025 earnings in early February. The stock price fell 11%, a staggering one-day move for a multitrillion-dollar stock, and adds to its struggles since its high late last year.

What sent the stock reeling? Amazon announced plans to spend $200 billion on its business this year, primarily on data centers and AI.

Of course, $200 billion is a lot of money. Amazon is becoming increasingly capital-intensive, which helps explain the stock's decline. Shares are down almost 20% from their high. Such steep drawdowns have been rare for Amazon's stock over the past decade.

Here is why this is a screaming buying opportunity for 2026 and beyond.

Image source: Getty Images.

Amazon is defending its cloud turf

A large chunk of the internet runs on Amazon's servers. Amazon Web Services (AWS) accounts for about 28% of the global cloud services market, making it a foundation layer of tech for countless enterprises worldwide. As you may know, the cloud business is the most significant contributor to Amazon's operating profits.

Since modern software and computing networks typically operate on the cloud, so does AI. As a result, AI applications are driving additional demand for cloud services, and the cloud itself was already an ongoing growth trend. CEO Andy Jassy noted during earnings that cloud demand is still outpacing available capacity, constraining AWS's growth.

The market clearly didn't like Amazon's $200 billion plans, but consider the alternative. Is it better for Amazon to conserve capital now, but steadily lose market share as cloud customers go elsewhere? What would that mean as AI grows and represents more of the cloud market? That could be very costly down the road.

AI is entering a new era

Personally, I predict that Amazon will be proven wise in hindsight. AI is entering a new era, from training AI models to inference. Inference is the computing that a trained AI model uses in real-world applications. An example would be autonomous AI agents, which are currently having a viral ChatGPT-like moment with personal AI assistant app OpenClaw.

Inference should continue to grow from here and will likely generate the recurring revenue that Amazon should be chasing. Amazon has gone so far as to design a custom chip, called Inferentia, purpose-built for AI inference. Amazon is positioning itself as the potential market leader in AI compute pricing and capacity. The larger AWS gets, the harder it is for others to displace it.

This situation seems similar to when Amazon invested billions of dollars to bolster its e-commerce supply chain. Eventually, it brought almost all of its fulfillment and delivery in-house, which only strengthened its business in the long term. Amazon is playing to win the next decade and beyond.

How AI could ultimately revolutionize Amazon's business

Amazon's post-earnings decline is a signal that Wall Street is more focused on the short term. Amazon's soaring capital expenditures are a drag on its cash flow. A less-profitable business will command a lower valuation. The opportunity here is to focus on the future fruits of Amazon's AI labor.

But there's more to it than AWS. AI will eventually progress into physical applications, such as humanoid robotics and advanced automation. There is arguably no company better positioned to benefit from these technologies than Amazon, which employs hundreds of thousands of workers in its fulfillment network.

Are there risks in looking years into the future? Of course! But the idea of a much leaner, more profitable Amazon, which rakes in cloud revenue from AI and uses robots to pick, pull, and deliver your Amazon order to your door, isn't so far-fetched. The stock is trading at roughly 16 times operating cash flow, near its lowest ratio in recent history. Given the valuation and long-term opportunities, Amazon seems likely to return to form.

Justin Pope 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.