Amazon Kicked Off 2026 With Momentum: Is AMZN the Top Mag 7 Stock to Purchase Right Now?

Amazon's Strong Start in 2026: A Closer Look

After a lackluster performance in the previous year, where Amazon (AMZN) shares rose just 5% and ranked as the weakest among the “Magnificent 7” tech stocks, the company has kicked off 2026 on a high note, already posting gains exceeding 5%. This turnaround has made Amazon the top performer within the group so far this year. While it remains to be seen if this momentum will last, there are compelling reasons to consider holding Amazon stock in the current environment.

Understanding Last Year's Challenges

Amazon’s underwhelming results in 2025 can be traced to several factors. One major concern was the company’s escalating investments in artificial intelligence, which have put pressure on free cash flow and are expected to weigh on future earnings through increased depreciation expenses.

Competition has also intensified in both Amazon’s core e-commerce and cloud computing segments. Traditional retailers such as Walmart have made significant strides in online sales, while tech giants like Microsoft and Alphabet have eroded Amazon’s dominance in the cloud space.

Additionally, the rise of third-party AI-powered shopping assistants poses a threat to Amazon’s lucrative digital advertising business. The company’s recent legal action against Perplexity highlights the risks these new AI agents present to its advertising revenue streams.

Ironically, Amazon now faces criticism for similar practices it accused others of, with some merchants objecting to their products being listed on Amazon’s platform without permission. The debate over Amazon’s approach to AI-driven shopping tools underscores both the opportunities and challenges AI presents for the company.

Reasons Amazon Remains Attractive in 2026

Despite past setbacks, Amazon stands out as one of the most promising “Magnificent 7” stocks at current prices, offering a favorable balance between risk and potential reward. The company is valued at a forward P/E ratio of 29.4, with a PEG ratio of 1.45. Excluding Tesla, which commands the highest valuation among its peers, Amazon’s metrics are in line with the group’s average.

Amazon’s valuation is also considerably lower than it was a few years ago, reflecting the company’s maturing e-commerce operations in developed markets. On the positive side, aggressive cost-cutting measures have boosted margins and earnings, leading to a decline in the stock’s P/E ratio as profits have surged.

Looking ahead, Amazon’s diversified business model positions it well for continued growth. While cloud computing remains its primary profit driver, the company is also expanding into areas such as streaming, grocery, pharmacy, B2B services, and its new budget-friendly platform Haul, which aims to compete with players like Temu and Shein.

Growth Prospects and the Role of AI

Although Amazon may no longer deliver the explosive growth of years past, its current valuation reflects this new reality. With a forward P/E below 30, the stock appears to be a solid choice for long-term investors. The company is expected to maintain double-digit revenue growth in the near term, with earnings growth likely to outpace sales.

Artificial intelligence could become a significant catalyst for Amazon, especially in enhancing its cloud and e-commerce businesses. While AI investments have temporarily weighed on cash flow and profits, they are expected to drive efficiency and margin expansion over time. At present, the market seems to be underestimating the potential upside from AI-driven growth.

Analyst Outlook for AMZN

Wall Street analysts remain optimistic about Amazon’s prospects, with an average price target of $295.05—representing a 22% upside from current levels—and a high target of $360, nearly 50% above the current price. While it’s wise to approach analyst forecasts with caution, especially given last year’s overly bullish calls, Amazon appears well-positioned for a rebound after its recent underperformance.