Is Amazon a Buy, Sell, or Hold in 2025?

Amazon (NASDAQ: AMZN) has been a winning investment over time. The stock has advanced more than 1,400% over the past decade, and just last year, it climbed 44%. There's a clear reason for this top performance: Amazon has built leadership in the two high-growth businesses of e-commerce and cloud computing, and they have helped the company generate billions of dollars in revenue and profit quarter after quarter.

In recent times, Amazon has added another important focus to its business: artificial intelligence (AI). The company is using this hot technology to improve its operations and gain efficiency, and it's selling AI tools through its Amazon Web Services (AWS) cloud computing unit. This helped spur excitement about the stock last year, making it one of the stand-out AI players.

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Now, though, in the early days of 2025, Amazon hasn't been a stand-out performer. The stock is little changed from the start of the year to the writing of this article on Jan. 17. So, is Amazon a buy, sell, or hold in 2025? Let's find out.

Image source: Getty Images.

An e-commerce empire

Amazon has built a worldwide e-commerce empire, and its Prime subscription service now has more than 200 million members. They pay an annual fee to access fast and free delivery of their purchases and a vast menu of entertainment offerings, from books to sports and films. Amazon boasts a high retention rate, with about 97% of U.S. Prime members renewing their membership for a year in the first three months of 2023, according to Statista.

Amazon suffered when interest rates were at their highest a couple of years ago, but the company used that time to revamp its cost structure. And this has proven to be a winning move. The e-commerce giant cut jobs and reshaped its fulfillment network, bringing inventory closer to its destination -- packages now travel from a regional center closer to your home rather than from national centers. This has decreased Amazon's cost to serve, allowing it to continue offering the lowest possible prices to shoppers.

On top of this, Amazon is using AI to increase warehouse efficiency through robotics and improving the Amazon experience for shoppers and sellers thanks to the use of AI assistants.

Though e-commerce is what most people think of when someone says "Amazon," cloud computing actually drives the company's profits, so AWS has been a key part of Amazon's growth story. As the world's No. 1 cloud services provider, AWS offers users a wide variety of tools and platforms -- and AI has provided this business a significant boost. Thanks to its AI offerings, AWS reached a $110 billion annualized revenue run rate last year.

Present across every layer of AI

AWS' strategy is simple: Aim to be present throughout every layer of AI, from selling customers basic elements, like chips, to providing a fully managed service that tailors large language models (LLMs) to their projects. AWS is also present in AI apps, such as those that help shoppers find items or developers create code. The business could see additional benefits through the next wave of AI growth, agentic AI. This is software designed to address problems, apply reason, and find and employ a solution.

AWS' Project Amelia now helps sellers with questions like, "How should I prepare my store for the holidays?" But eventually, Amelia will "learn and evolve" in a true agentic AI fashion. AWS also offers customers tools to build AI agents tailored to their needs.

So, now let's return to our question: Is Amazon a buy, sell, or hold this year? The stock trades for only 35 times forward earnings estimates today, a drop from more than 42 times just a few weeks ago. This looks particularly cheap, considering Amazon's earnings track record, leadership in two major markets, and position in the high-growth area of AI. This means it's absolutely a bargain buy -- and a hold if you already own it -- for 2025.

Though it's impossible to predict with 100% certainty whether Amazon will mimic last year's top performance, additional earnings and business gains spurred by Amazon's AI investments could act as positive catalysts. Even better, Amazon has what it takes to win over the long haul in e-commerce, cloud, and AI. And that should keep the shares moving higher over time.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.