Amazon is the IBD Stock of the Day for Tuesday. Shares of the e-commerce and cloud-computing behemoth are hovering above a cup-with-handle buy point following a breakout on Monday.
In its push to be an artificial intelligence leader, Amazon has pledged major U.S. investments into cloud infrastructure in recent days. The Seattle-based tech giant said Monday it will spend at least $20 billion in Pennsylvania to expand its AI infrastructure, including new data centers. The company last week pledged to spend $10 billion in North Carolina for AI data centers and other cloud-computing infrastructure.
Amazon Web Services is the leading cloud provider. But Amazon is battling against Microsoft and Google-parent Alphabet to win AI cloud spending from enterprises. The North Carolina and Pennsylvania investments come as Amazon is telling investors that it expects to spend $100 billion on capital expenditures this year, focused mostly on AI.
Investors tend to focus on Amazon's cloud business because it drives the majority of the tech giant's profits. However, Wall Street analysts this year also have debated how Amazon's e-commerce business can navigate the uncertainty from tariffs.
Amazon stock tumbled following the April 2 "Liberation Day" when President Donald Trump announced his broad tariff plan. But Trump has paused or lowered the majority of those levies. Amazon rocketed 8% on May 12, when the 145% tariffs on Chinese goods were lowered to 30% though a temporary deal between the U.S. and China.
The tariff reprieve has helped Amazon stock bounce back. Shares gained 11% overall in May, Amazon stock's first positive month of trading since January.
Shares have pushed ahead 5% so far in June, powering a breakout for Amazon stock past a 214.84 buy point on Monday. That entry represents a return to a three-month high Amazon reached on May 13.
On the stock market today, Amazon stock gained a fraction to close at 217.61.
What's Next For Tariffs, Amazon?
Amazon remains down about 2% year to date and 12% below a record-high 242.52 that shares reached in early February.
Amazon's Relative Strength Rating sits at 78 out a best-possible 99. That means Amazon has outperformed 78% of stocks in the IBD database over the past 12 months. While that is an improvement from a 70 score three months ago, IBD typically recommends focusing on stocks with at least an 80 RS Rating.
Amazon is part of the Magnificent Seven tech stocks that powered the market rally in 2023 and 2024. After a rough start to the year, so-called megacap tech stocks have been rallying since mid-May.
Meanwhile, Amazon's Prime Day deal event for members is coming up next month. It will be closely watched to gauge whether tariff uncertainty is slowing consumer spending.
Amazon's first-quarter results beat expectations for earnings and sales. But the stock fell following the May 1 report because the tech giant offered a mixed outlook for the current June-ending quarter. Amazon's cloud business also recorded March-quarter revenue slightly below Wall Street expectations.
Wall Street Bullish On Amazon Stock
Wall Street analysts are broadly bullish. Of the 71 stock analysts following Amazon, 96% have a buy rating, according to FactSet.
Those analysts hold an average target price of 238.77, FactSet says, implying roughly 11% upside from Amazon's price Tuesday.
JP Morgan analyst Doug Anmuth last week upped his price target for Amazon stock to 240 from 225. The company has the largest tariff risk among internet stocks, Anmuth acknowledged. But, he said, the company is "the most diversified mega-cap across revenue/profit and has numerous large growth opportunities."
The IBD Stock Checkup tool shows Amazon stock holds an IBD Composite Rating of 94 out of a best-possible 99. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
