Down 17% From Its All-Time High, Should You Buy This AI Stock Right Now?

Volatility has been the single most prominent theme investors have dealt with in 2025. At one point, the closely watched S&P 500 index fell 10% from its peak, reaching correction territory. The market is not a fan of uncertainty, which there's a lot of right now. But there are opportunities out there to take advantage of.

The latest market sell-off has hit some well-known large-cap tech stocks hard. In fact, there's one artificial intelligence (AI) stock that currently trades 17% off its peak (as of March 26), which was established in early February. Is it time to add this dominant business to your portfolio right now?

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Here are three reasons why that looks like a smart move.

Growth across the board

It's rare to see a company riding multiple secular trends. But this is precisely how to describe Amazon (NASDAQ: AMZN). It's the undisputed leader in online shopping, which still brings in most of the revenue.

What's more, the business has top market share in cloud computing. Its Amazon Web Services (AWS) platform should keep benefiting from increasing interest to transition IT loads off premises.

Then there's digital advertising, a segment that posted 18% revenue growth in the fourth quarter. This budding moneymaker is becoming a more important piece of the Amazon puzzle. And in terms of market share, it's only behind Alphabet and Meta Platforms.

Favorable tailwinds have helped Amazon deliver strong revenue growth over the years. Sales in 2024 of $638 billion were more than 7 times higher than 10 years before.

However, the management team has been focusing on building a more efficient organization. Controlling costs has resulted in improving profitability. This drove operating income to jump 86% in 2024.

Over the next three years, Wall Street analysts see operating income rising at a compound annual rate of 20.8%. That outlook, which is quite robust, suggests faster growth for the bottom line than for revenue. This is something shareholders will appreciate.

Focused on AI efforts

One other tech theme that should propel Amazon is artificial intelligence (AI). This technology helps shoppers find the products they are looking for when browsing Amazon.com. It also supports content recommendations within Prime Video.

AWS is proving to be the company's major AI innovation center. It makes sense why. Businesses of all sizes that want to leverage AI are turning to AWS as their mission-critical tech infrastructure provider. AWS offers a wide range of AI tools, such as Transcribe (to convert speech to text), Bedrock (to build generative AI apps), and SageMaker (for data analysis), to name a few.

This builds on ongoing efforts to make further progress on the hardware side of things. Amazon has developed, and sells, Trainium chips that support AI training and inference.

During the Q4 2024 earnings call, CEO Andy Jassy mentioned that Amazon plans to spend more than $100 billion this year on capital expenditures (capex). "The vast majority of that capex spend is on AI for AWS," he said.

This mimics the massive outlays other tech giants are undertaking to ride the AI boom. Critics don't hesitate to call this wasteful spending, as they believe capacity oversupply will flood the market with demand not being strong enough to support it.

Whatever your opinion is, if history is any indication, Amazon's AI approach will follow its long-running strategy implemented by founder Jeff Bezos, which is to put customers and their needs first.

Opportunity awaits

With Amazon shares down 17% from their recent all-time high, investors are staring at an opportunity to add a dominant tech-forward enterprise, one that's at the forefront of AI innovation, to their portfolios. The valuation is reasonable, at a forward P/E ratio of 31.7.

It's best not to overthink this situation. Buying and holding Amazon stock is a smart financial move.

Should you invest $1,000 in Amazon right now?

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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. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Meta Platforms. The Motley Fool has a disclosure policy.