According to Forbes, Amazon stock has dropped 10.7% over the past week amid concerns about slowing AWS growth and AI bubble fears. The $2.4 trillion company generates $670 billion in revenue with shares recently trading around $222. Historical data shows Amazon fell 56% during the 2022 inflation shock, 22.7% during the 2020 COVID crash, and 34.1% during the 2018 correction. The current worry is that a 30% further decline could push shares to $156, testing investor confidence in Amazon’s AI investments and cloud business resilience.
The rollercoaster ride
Here’s the thing about Amazon – it’s always been volatile. The stock consistently falls harder than the S&P 500 during market corrections. But it also bounces back faster. That 56% drop in 2022? Completely recovered in 16 months. The COVID crash? Back to previous highs in under two months. Basically, Amazon investors need strong stomachs. The pattern is clear: steep declines followed by impressive rebounds. But each time feels different, and this AI bubble concern adds a new layer of complexity.
Is the AI bubble real for Amazon?
Amazon is spending billions on AI infrastructure, betting heavily that AWS will remain the cloud computing leader. But there’s growing skepticism about whether all this AI investment will pay off quickly enough. With a P/E ratio of 34, Amazon trades at a premium that assumes strong future growth. If AI spending doesn’t generate expected returns soon, that valuation could come under serious pressure. And let’s not forget the competition – Microsoft Azure and Google Cloud aren’t sitting idle while Amazon dominates.
The case for spreading your bets
Forbes makes an interesting point about diversification. Holding individual stocks like Amazon can be nerve-wracking during these volatile periods. Their High Quality Portfolio has returned over 105% since inception with less volatility than the broader market. Similarly, the Reinforced Value Portfolio has outperformed its benchmark. The message is clear: maybe don’t put all your eggs in one basket, even if that basket is Amazon.
So what should investors do?
The fundamental question is simple: Would you still believe in Amazon if it dropped another 30% to $156? If you trust their cloud business, e-commerce dominance, and AI strategy, then buying the dip makes sense. But if the volatility keeps you up at night, diversification might be smarter. Amazon’s financial metrics still look strong, and their balance sheet remains healthy. But in today’s uncertain market, balancing conviction with caution seems like the wise approach.
