The world is changing. After decades of a steady relationship -- albeit occasionally testy -- between China and the United States, a massive trade war has erupted. Investors are scared about what it means for consumer spending, inflation, and stocks in their portfolios.
One company in the middle of this trade war is Amazon(NASDAQ: AMZN). The online retailer and its millions of sellers ship tons of goods from China every year. That connection may be ending. It is no surprise then to see Amazon stock down 26% from all-time highs.
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Amazon could indeed see some disruption from the China tariffs, but for those focused on the long term, this looks like a supreme buying opportunity for an artificial intelligence (AI) winner. Here's why investors should buy the stock hand over fist right now.
Resilient retail segments
Amazon's online marketplace sources goods from sellers all over the world, with a heavy focus on China. In fact, the company relies so much on Chinese sellers that it put in a disclosure about the risk in its annual report.
Now, with China and the United States in a tariff war, it will be close to impossible for the majority of these sellers to remain on the Amazon marketplace in North America.
So, is Amazon's retail business doomed? I don't think so. There will be hiccups along the way, but the importance of its business model is that it aggregates demand from consumers and has its own vertically integrated delivery network in the United States. If these Chinese sellers go away, they can be replaced over time by sellers from Vietnam, Mexico, and other countries.
The majority of its retail profit comes from fees from third-party sellers -- no matter where these sellers originate -- as well as advertising services and Amazon Prime subscriptions. These segments will grow in North America as long as consumer spending grows, which I think is likely over the long term.
Plus, the company is gaining market share in retail spending due to the tailwind of e-commerce adoption and its increasingly convenient delivery times. It had record delivery speeds in 2024, with many items now having same-day delivery.
North America retail revenue was $388 billion in 2024, with $25 billion in operating income. Even if tariffs disrupt its current seller base, I think the platform will do just fine over the long haul due to its diversified revenue sources and the long-term tailwind of e-commerce adoption.
The massive opportunity in AI
We cannot talk about the company without mentioning Amazon Web Services (AWS) and AI. AWS is the largest cloud computing business in the world, generating $108 billion in revenue in 2025. Operating income was higher than Amazon's entire North America and international retail business at close to $40 billion last year.
AI spending is leading to accelerating revenue growth at AWS. Sales grew 19% year over year last quarter compared to 13% in the same period of 2023. It looks like the AI spending party is only getting started, too. Just this week, Nvidia announced that it will be allocating $500 billion in the U.S. to build AI supercomputers. (Yes, $500 billion.) AWS will use some of these computer chips as it forms the backbone of the AI revolution.
Start-ups like OpenAI and Anthropic require tons of computing power to train and operate their AI models, and that spending is only growing. If AWS can double its revenue over the next five years and maintain an operating margin similar to the one today, the segment will be generating $80 billion in operating income just as a subsidiary of Amazon. That is more than almost any other company in the world.
With the stock price trending downward, investors have the opportunity to purchase shares of Amazon just at the moment its profits will begin to inflect higher. This is due to the rising tide of AWS spending, its efficiency initiatives, and the fast growth of high-margin segments such as advertising.
Right now, the stock trades at a forward price-to-earnings ratio (P/E) of 28. This year may be volatile, but over the long term, Amazon should keep growing with dual tailwinds of cloud computing and e-commerce spending at its back. For that reason, investors with a durable time horizon should buy the stock 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. Brett Schafer has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.
