2 Reasons Investors Are Worried About Amazon Stock — Should They Be?

Amazon's stock is down over 8% YTD as of May 2025, underperforming the S&P 500, due to concerns about a potential economic slowdown and a possible deceleration in AI spending, which could impact Amazon Web Services. Despite near-term uncertainties related to tariffs and the broader economy, analysts remain largely positive on Amazon's long-term outlook, with 66 out of 70 holding a "buy" or "strong buy" rating and an average 12-month price target suggesting a 19% upside; Morgan Stanley dismisses fears of an AI slowdown as unfounded, citing continued strong AI funding.

Analysis

Amazon (AMZN) has experienced a notable year-to-date stock price decline of over 8% as of May 23, 2025, significantly underperforming the S&P 500's 1.12% loss during the same period. This downturn is primarily attributed to investor concerns regarding the broader economic climate and specific company headwinds. Key anxieties stem from macroeconomic pressures, including a contraction in U.S. GDP in Q1 2025 and persistent uncertainties related to the Trump Administration's tariff policies, which pose risks to consumer spending and corporate profitability. A second significant concern revolves around a potential deceleration in Artificial Intelligence (AI) capital expenditures following robust 2024 levels, which could adversely affect Amazon Web Services (AWS), a pivotal growth driver and key participant in the AI infrastructure landscape; this apprehension was amplified by prior declines in AI-focused equities such as Nvidia. Conversely, the long-term outlook presents a more constructive narrative: Morgan Stanley has labeled fears of an AI investment slowdown as 'laughable,' and empirical data from CV VC for Q1 2025 indicates an acceleration in AI funding, with the sector attracting $59.6 billion, or 53% of total global venture capital. This positive sentiment is largely mirrored by the analyst community, with 66 out of 70 analysts covering Amazon in May 2025 maintaining 'buy' or 'strong buy' recommendations and an average 12-month price target of $238.79, suggesting a 19% potential appreciation. Nevertheless, considerable market caution persists due to the unresolved nature of tariff implementations and their potential economic consequences, factors that contributed to a broader bear market environment in 2025.

Key Decisions for Investors

• Long-term oriented investors could view Amazon's current stock pullback, down over 8% YTD as of May 2025, as a strategic buying opportunity, considering the strong analyst consensus (19% upside target) and expert dismissal of AI slowdown fears.
• Monitor key macroeconomic data releases, particularly GDP growth and consumer spending trends, and closely track developments related to the Trump Administration's tariff policies, as these factors will significantly influence Amazon's near-term performance.
• Scrutinize upcoming earnings reports for AWS growth metrics and management commentary on corporate AI investment intentions to assess the actual impact on this key division, especially given conflicting market narratives on AI spending.
• Investors should weigh the potential for near-term volatility stemming from economic and tariff uncertainties against the company's robust long-term growth prospects in e-commerce and cloud computing before adjusting positions, ensuring alignment with individual risk tolerance.