Billionaire Bill Ackman Bought Amazon Stock -- Should You?

Bill Ackman's Pershing Square recently disclosed a significant stake in Amazon, acquiring 5.82 million shares valued at approximately $1.35 billion, making it roughly 9% of his U.S. equity portfolio. This purchase likely occurred during the April market sell-off when Amazon's stock was more attractively priced, driven by the company's strong fundamentals in e-commerce, its highly profitable and growing AWS cloud computing division, extensive AI integration, and rapidly expanding advertising business. The move highlights a prominent investor's conviction in Amazon's long-term value, prompting other institutional investors to reassess their own investment theses and valuation perspectives rather than merely replicating the trade.

Analysis

Pershing Square's newly disclosed $1.35 billion stake in Amazon.com, representing approximately 9% of its U.S. equity portfolio, signals a high-conviction bet on the company's fundamental value by a prominent investor. The trade was likely initiated during the April market sell-off when the stock price was near $161, suggesting a value-oriented entry point well below recent levels. The investment thesis appears to be anchored in Amazon's multi-faceted growth drivers beyond its established e-commerce moat. The key profit engine, Amazon Web Services (AWS), demonstrated robust health with 19% revenue growth to $108 billion in 2024, contributing over half of the company's total operating profit ($39.8 billion out of $68.6 billion). Furthermore, the company's advertising business is emerging as a significant high-margin contributor, growing faster than AWS at 22% in Q2 2025 and approaching a $50 billion annualized revenue run-rate. This strategic allocation by a respected fund underscores a view that Amazon's integration of AI, combined with the profitability of AWS and the rapid expansion of its advertising segment, presents a compelling long-term value proposition.

Key Decisions for Investors

• Investors should reassess their valuation models for Amazon, ensuring they adequately account for the high-margin, high-growth contributions from the AWS and advertising segments, which now appear to be the primary value drivers.
• Given that Ackman's likely entry point was significantly lower than the current market price, it is prudent to analyze the current valuation for an appropriate margin of safety before initiating or adding to a position, potentially waiting for market pullbacks.
• Monitor key performance indicators that validate this investment thesis, including AWS revenue growth and operating margins, the growth rate of the advertising business, and any regulatory developments impacting its major segments.