Amazon Stock Nears Multiyear Valuation Low as AI Spending Rises

Amazon’s trailing valuation has fallen near a multiyear low as the company increases artificial-intelligence spending, pushes free cash flow into negative territory and faces an advertising-auction lawsuit.

Amazon ended Oct. 8 at $254.88, a 1.94% daily decline that left the shares roughly 8.5% below their early-August 52-week high. The stock’s trailing price-to-earnings ratio is about 20.5, compared with a five-year average of roughly 60.

The lower valuation comes as Amazon expands its infrastructure plans. The company raised its expected 2026 capital spending to about $220 billion after its second-quarter results. The planned spending includes AI infrastructure, data centers, semiconductors, robots and satellites.

That investment has reduced cash generation. Amazon recorded a $7.6 billion free-cash-flow outflow for the 12 months ended June 30, compared with an $18.2 billion inflow a year earlier. Purchases of property and equipment, net of proceeds and incentives, increased $66.1 billion from a year earlier, with the company tying the increase primarily to AI investment.

Amazon’s operating performance remained strong in the second quarter. Net sales rose 20% from a year earlier to $200.6 billion, while Amazon Web Services sales increased 37% to $42.2 billion. AWS operating income climbed to $16.6 billion from $10.2 billion.

Reported earnings also benefited from a $53.4 billion pre-tax gain, primarily connected to Amazon’s investments in Anthropic. Because the gain is non-operating, it does not represent recurring profit from Amazon’s core businesses, even though it affects the trailing P/E calculation.

Regulatory pressure adds another risk to the valuation. The Federal Trade Commission and 22 states sued Amazon on Aug. 31, alleging that the company secretly increased prices in its online advertising auctions.

The complaint alleges that Amazon charged advertisers their winning bids close to 80% of the time and extracted tens of billions of dollars from advertising customers. It says the alleged conduct affected more than one million brands and sellers, including more than 500,000 small and midsized businesses.

The litigation is ongoing, and no court has established the claims as fact. Amazon disputes them. The central market question is whether growth in AWS and AI-related businesses can eventually generate enough operating profit and cash flow to support the company’s expanded infrastructure commitments.