The Billionaire Bet on Amazon’s Hidden Value

Billionaire fund managers are quietly piling into Amazon, convinced that the stock is undervalued despite its dominance in the tech industry. Investors like David Tepper and Bill Ackman, known for their contrarian views, have made significant bets on Amazon’s potential.

Over the past year, top hedge funds have increased their stakes in Amazon, with some firms doubling or tripling their holdings. These investors believe they’re getting an unusually good deal on one of the world’s most valuable companies. For value investors like Seth Klarman and Lewis Sanders, Amazon’s underperformance is a tantalizing opportunity to snag a piece of the tech giant at a discount.

Amazon’s cloud division, Amazon Web Services (AWS), has emerged as a powerhouse in the AI industry. According to Charles Lemonides, founder of ValueWorks, AWS alone is worth nearly half of Amazon’s $2.5 trillion market value – and that doesn’t even account for the company’s other rapidly growing businesses. By breaking down Amazon into its constituent parts, investors can see that the stock is being undervalued by the market.

Lemonides’ analysis paints a compelling picture: AWS is the linchpin of Amazon’s success in AI. As the company continues to execute across its businesses – from cloud to advertising and streaming – investors are getting an increasingly attractive risk-reward proposition. And let’s not forget that Amazon has navigated turbulent times with ease, thanks to a leadership team led by CEO Andy Jassy that remains intact.

One potential red flag is the sheer scale of Amazon’s spending binge. The company has committed $200 billion in capital expenditures for 2026, mostly for AWS as it expands its AI and cloud capacity. While this might seem expensive at first glance, investors who believe in the long-term potential of these investments are willing to stomach near-term earnings pressure.

Amazon has become a magnet for institutional investors – many of whom have reported significant increases in their stakes over the past quarter. Some of the biggest buyers include UBS Asset Management and Norway’s Norges Bank. Even Morgan Stanley notes that Amazon trades at a steep discount to its peers once you account for expected profit growth.

However, not everyone is convinced – Berkshire Hathaway has significantly reduced its stake in the company, while Stanley Druckenmiller’s Duquesne Family Office has cut back on its common stock position. The debate will continue, but it’s clear that a group of savvy investors sees Amazon as an undervalued gem worth betting on.

What This Means For the AI Industry

As Amazon continues to execute across its businesses and invest heavily in cloud infrastructure, other players may follow suit – or try to keep pace. This has significant implications for the broader tech industry: if Amazon is indeed a bargain megacap stock, what does that say about the market’s perception of AI’s potential? And how might this shape investment decisions across the sector?

Amazon’s underperformance in recent years has been puzzling – despite its dominance in cloud computing and AI. This trend echoes earlier patterns: in the late 1990s and early 2000s, investors were skeptical of Amazon’s prospects, only to see the company explode into one of the world’s leading e-commerce players.

The Road Ahead

As the debate rages on about Amazon’s valuation, it’s essential for investors to consider the long-term implications. If Lemonides’ analysis holds true, Amazon’s stock could be poised for significant upside – particularly if the company continues to execute across its businesses and deliver strong profit growth.

Amazon’s sheer scale and breadth of offerings make it an increasingly attractive bet for investors who believe in its long-term potential. This diversity makes it less vulnerable to market fluctuations than other AI-powered players. The story of Amazon’s undervalued stock is far from over – and one thing’s certain: the world will be watching as these billionaire bets unfold.