Amazon Is Down 7% in 2026. Is This a Once-in-a-Lifetime Buying Opportunity?

Over the past five years, Amazon (NASDAQ: AMZN) has been the worst-perforing stock among the "Magnificent Seven."

Amazon has had an average annualized return of 6.9% over the past five years, which is far below the other magnificent megacaps. The next closest is Microsoft with an average five-year return of 11.5%. Even the S&P 500 has been a better investment than Amazon over that stretch, with an average five-year annual return of 11.7%, as of March 10.

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In 2026, Amazon's struggles have continued, as the stock is down 7% year to date. The other Magnificent Seven stocks are also negative, but only Tesla, down 16%, and Microsoft, down 10%, have performed worse.

Amazon's more recent problems stem from losing market share in the cloud computing space, tariffs negatively impacting its e-commerce platform, and what investors see as overspending on AI.

Earlier this year, Amazon announced that it was allocating $200 billion for capital expenditures, a record for the company and a whopping 50% more than last year. Most of it will be on AI infrastructure, which has given investors pause. The concern is that Amazon is already spending too much on AI and it's losing market share, so why spend more?

But I think the Amazon backlash has created a phenomenal buying opportunity, for one major reason.

As cheap as Amazon gets

The primary reason that Amazon stands out as a buy right now is its valuation.

Other than last April, right after the tariffs went into effect, Amazon's valuation hasn't been this low in almost two decades, dating back to late 2008 during the financial crisis.

Amazon stock trades at around 29 times earnings and 26 times forward earnings. That is about the S&P 500 average right now. For a stock as dynamic as Amazon, a market leader in two of its businesses, the valuation is too cheap to ignore.

As for the reasons for the dip, I think they are overblown. Part of it is investor backlash over overvalued large-cap stocks, which Amazon had been. Part of it is backlash against AI capex spending, as investors question the return on investment that companies are really getting from their AI investments.

Playing AI catch-up

In the case of AI, I think the additional spending on AI is necessary for Amazon to maintain its lead in cloud computing. Generally, one of the reasons Amazon is losing ground is that competitors, mainly Microsoft and Alphabet, better navigated capacity constraints because they either had better partnerships or developed their own infrastructure and chips.

The $200 billion in capex spending is needed to overcome those supply constraints and build the necessary data centers and infrastructure to handle its massive backlog and accommodate its future capacity needs.

The combination of Amazon's low valuation and the expectation that the company will grow faster with greater capacity has Wall Street analysts bullish on Amazon. Some 92% of analysts rate Amazon stock as a buy with a median price target of $285 per share, which would suggest 33% upside.

It feels like an inflection point for Amazon right now, so investors should consider taking advantage of this opportunity.

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