Amazon (AMZN) shares have delivered modest returns of approximately 1.5% year-to-date, substantially trailing the S&P 500’s performance. This underperformance is precisely what’s attracting some of Wall Street’s most renowned hedge fund managers.
Both David Tepper’s Appaloosa Management and Seth Klarman’s Baupost Group have elevated Amazon to their number one portfolio position. Bill Ackman’s Pershing Square constructed its Amazon stake from zero over the previous year, now representing approximately $2.4 billion and ranking as the fund’s second-largest investment.
Lewis Sanders’ Sanders Capital, previously led by the former AllianceBernstein CEO, expanded its Amazon holdings by 100% during Q1 2026, accumulating 29.8 million shares valued at approximately $6.2 billion.
Concurrently, ARK Invest funds managed by Cathie Wood added 41,141 Amazon shares worth about $9.6 million on June 23, at a closing price of $234.27 per share. This purchase occurred amid widespread tech sector weakness that particularly impacted semiconductor and AI stocks.
The unifying theme among these institutional buyers centers on a sum-of-the-parts valuation framework. Charles Lemonides, founder of ValueWorks, estimates AWS alone represents approximately 50% of Amazon’s $2.5 trillion market capitalization, with retail operations comprising the remaining half. Under this analysis, segments including advertising, media, and streaming services essentially carry zero valuation.
“Their businesses are worth more than the share price and they’re in the catbird seat on just about everything,” Lemonides said. “Why wouldn’t one want to own Amazon today?”
Amazon Web Services delivered 28% year-over-year revenue growth in Q1 2026, generating $37.6 billion and surpassing analyst consensus of $36.64 billion. This marked the division’s strongest growth trajectory in over three years. CEO Andy Jassy characterized it as the “fastest growth in 15 quarters.”
Amazon’s committed revenue backlog totaled $364 billion as of March 31. This figure excludes Anthropic’s pledge to invest over $100 billion on AWS infrastructure throughout the coming decade.
For the complete first quarter of 2026, Amazon reported revenue of $181.5 billion, representing 17% year-over-year growth, accompanied by operating income of $23.9 billion. The company exceeded Wall Street’s earnings per share projection of $1.64, delivering $2.78 per share.
Amazon has indicated plans for approximately $200 billion in capital expenditures throughout 2026, predominantly allocated toward AWS infrastructure expansion. This substantial investment temporarily constrains near-term profitability, contributing to elevated forward P/E multiples despite robust underlying growth.
The stock currently trades at approximately 27 times forward earnings, exceeding Microsoft and Nvidia at 18-20 times and Meta at 17. The Nasdaq 100’s multiple of roughly 24 times also appears more attractive on this measure.
However, Morgan Stanley has previously highlighted that Amazon trades at a considerable discount relative to competitors when adjusting for anticipated profit expansion rates.
Bank of America maintains a Buy rating with a $310 price target, primarily based on sum-of-the-parts methodology that assigns substantial value to AWS. The institution also projects Amazon Prime Day will produce approximately $22 billion in sales and anticipates Q2 revenue will meet or exceed the upper range of management guidance.
Not all prominent investors share this optimism. Berkshire Hathaway reduced its Amazon holdings from 10 million shares to nearly zero according to its latest regulatory filing. Stanley Druckenmiller’s Duquesne Family Office eliminated roughly 94% of its common stock position, though he simultaneously expanded his call options position from 100,000 to 200,000 shares.
According to Quiver Quantitative data, institutional investors collectively added 253 million Amazon shares during the most recent reporting period.
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