Amazon Stock Hasn't Been This Cheap in Over a Decade. Has the Sell-Off Gone Too Far?

Amazon shares trade at a P/E ratio of 29, the lowest valuation in over a decade, as investors balk at the company's planned $200 billion capital expenditure in 2026. The sell-off comes despite accelerating fundamentals: Q1 2026 revenue growth hit 17% year-over-year while net income surged 77%, both driven by heavy AI infrastructure investments.

The market is pricing in concern over the scale of spending, but the early returns suggest the capex is already translating to top- and bottom-line acceleration. Analysts expect profit growth to moderate to 21% going forward, a slowdown from the Q1 pace but still robust by large-cap tech standards.

The disconnect between valuation compression and earnings growth creates a potential entry point for long-term holders. Amazon hasn't traded at this multiple since before its cloud and advertising businesses reached scale. The current setup mirrors past periods where heavy reinvestment preceded margin expansion cycles.