Analysts seem to think Amazon (NASDAQ: AMZN) should be on a lot of people’s lists of stocks to buy this month. The company’s latest update sent the stock higher and past the $3trn mark.
The results were very strong, there’s no doubt about that. But in the world of long-term investing is buying at today’s prices asking for trouble?
A crowded room?
The semiconductor trade is getting crowded — and investors know it. According to the latest Bank of America data, 82% of investors call semiconductor stocks the most crowded trade right now.
Crowded trades create risk, of a sort. If everyone’s already buying a stock, it’s harder to see what can make the price keep going up. By contrast, just 7% think too many investors are buying the Magnificent Seven. That gap matters for a few reasons:
- Investors worry capital expenditures across the industry are outrunning real demand.
- Critics, echoing investor Michael Burry, argue stretched depreciation schedules are flattering hyperscaler earnings.
- Chips are cyclical and something of a commodity — the businesses running them are not necessarily either.
All of these are points are worth considering. But the trouble is, Amazon’s results were just so strong.
The numbers
Amazon’s Q2 crossed $200bn in quarterly revenue for the first time, up 20% year-on-year, with operating income up 43% to $27.5bn. A lot of the heavy lifting was done by AWS.
| Metric | Q2 2026 |
|---|---|
| AWS revenue | $42.2bn (+37%, fastest in 18 quarters) |
| AWS backlog | $496bn |
| Advertising revenue | $19.8bn (+26%) |
| 2026 capex guidance | $220bn (up from ~$200bn) |
I suspect most investors were watching two numbers: AWS revenue and capital expenditures. Cloud revenue growth was strong. But unlike Microsoft, the firm continued to push its spending plans higher for the rest of the year.
As CEO Andy Jassy put it: “Even at that amount, we will still not have enough capacity to meet all the demand we have in 2026.” In other words, demand isn’t going anywhere – yet.
What it means
Some of that spending may well prove premature. Like Meta Platforms, Amazon might ultimately find out that it has more computing power than it really needs. That sounds like a concern – and it might well be for other companies. But there’s a real difference between cyclical chipmakers and companies with durable long-term advantages.
Amazon’s forward price-to-earnings (P/E) ratio is around 28. That’s roughly in line with Alphabet despite faster growth in both the cloud business and the advertising division.
To my mind, that suggests the market’s focusing on the risk of falling demand. That’s reasonable, but I think a strong balance sheet helps with this kind of difficulty.
Bottom line
I own Amazon shares in my Stocks and Shares ISA and I’m trying to figure out what to do. It’s always a bit uncomfortable buying a stock at an all-time high. The company’s growth however, has been outpacing the rising share price. Given this, the value case is arguably improving, not deteriorating.
At today’s prices, I think it’s worth considering. It isn’t easy to buy a stock that was a lot cheaper a week ago, but failing to take a look can be just as much of a mistake as buying without thinking.
Should you invest £5,000 in Amazon right now?
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Stephen Wright owns shares in Amazon.
