Introduction to Amazon's Recent Selloff

Amazon, the e-commerce giant, has experienced one of its largest selloffs in the past decade, with its stock price plummeting by over 20% since early February 2025. This significant decline has raised questions among investors about whether it's a good time to buy into Amazon or if the stock will continue to fall. Despite the recent downturn, Amazon remains a powerhouse in both the retail and cloud computing sectors, thanks to its robust Amazon Web Services (AWS) platform and its dominant position in e-commerce.

Understanding the Selloff

Several factors have contributed to Amazon's recent stock performance:

• Economic Concerns: The broader economic landscape, including inflation and potential recession fears, has impacted consumer spending and investor confidence. Inflation rose to 3% in January, up from 2.4% in September, which can affect consumer behavior and discretionary spending[2].
• AI Spending and AWS Growth: While AWS continues to grow, driven by artificial intelligence (AI) adoption, Amazon's aggressive spending on AI capabilities has raised concerns about profit margins. The company plans to spend $100 billion on capital expenditures in 2025, primarily for AI enhancements[3].
• Boycott Impact: A recent weeklong boycott had minimal impact on Amazon's stock price, with shares experiencing only a transient dip before recovering[1][5].

Why Amazon Remains a Strong Investment

Despite the challenges, Amazon's fundamentals remain strong, making it an attractive investment opportunity:

• Solid Earnings and Growth: Amazon reported a record operating income of $68.6 billion in 2024, with AWS contributing significantly to this growth. Although operating income is expected to decrease by $700 million in 2025, this still positions the year as one of the company's most profitable[3].
• AWS and AI Potential: The demand for cloud computing and AI solutions continues to rise, and Amazon is well-positioned to capitalize on this trend. AWS's growth has been stellar, and its AI capabilities are crucial for maintaining market leadership[3].
• Diversified Business Model: Amazon's diverse business segments, including e-commerce, advertising, and cloud services, provide a robust foundation against economic fluctuations.

Technical Indicators Suggest a Relief Rally

Technical indicators suggest that Amazon's stock may be due for a relief rally:

• Relative Strength Index (RSI): On March 10, Amazon's RSI was around 27, indicating that the stock is oversold and potentially ripe for a rebound. Historically, such low RSI levels have preceded significant rallies[2].
• Investor Sentiment: Prominent investors like Doug Kass have started taking long positions in Amazon, anticipating a potential short-term rally. This shift in investor sentiment could signal a turning point for the stock[2].

Conclusion: Is It Time to Buy the Dip?

Given Amazon's strong fundamentals, diversified business model, and potential for a technical rebound, buying the dip could be a strategic move for investors. While economic uncertainties and AI spending concerns exist, Amazon's ability to adapt and innovate positions it well for long-term success.

Key Takeaways:

• Amazon's Recent Decline: Over 20% drop in stock price since early February.
• Economic and AI Spending Concerns: Broader economic factors and aggressive AI investments have impacted investor sentiment.
• Strong Fundamentals: Record operating income in 2024 and continued AWS growth.
• Technical Indicators: Oversold conditions suggest potential for a relief rally.
• Investor Sentiment: Prominent investors are taking long positions, anticipating a rebound.