<div id="readability-page-1"><p>Billionaire Bill Ackman recently revealed that his Pershing Square Capital Management investment fund took a large stake in <strong>Amazon</strong> <span>(AMZN<span> -0.37%</span>)</span> in April. Ackman was buying the stock following the market downturn after President Donald Trump's &#34;Liberation Day&#34; tariff announcements roiled the market, including Amazon.</p> <p>Pershing Square's chief investment officer Ryan Israel recently discussed the investment with analysts, stating that the fund acquired a &#34;fantastic franchise&#34; at an &#34;extremely attractive&#34; valuation, and that Amazon would be able to navigate any tariff-induced slowdown. Furthermore, he praised Amazon CEO Andy Jassy and the company's dual business model, stating that it can deliver more than 20% earnings growth. </p> <p>With Amazon shares having rallied off their lows, the question is whether investors should follow Ackman into Amazon at current levels.</p> <div><p><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MjAyNjEvcGFja2FnZS1kZWxpdmVyeS1hbWF6b24tdXBzLWZlZGV4MS5qcGcmdz03MDA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="466" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MjAyNjEvcGFja2FnZS1kZWxpdmVyeS1hbWF6b24tdXBzLWZlZGV4MS5qcGcmdz03MDA"/></p><p>Image source: Getty Images.</p> </div> <h2>No longer in the bargain bin, but still attractive</h2> <p>Back in April, Amazon's stock traded down to a forward price-to-earnings ratio (P/E) in the mid-20s, while today it's back up to around a 33 times multiple. Although off its lows, the stock is still at one of the lowest valuations in its history.</p> <p><img src="https://imageproxy.pbkrs.com/https://media.ycharts.com/charts/73c4087654165ec2cf77ff55feabf37a.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="720" height="539" original-src="https://imageproxy.pbkrs.com/https://media.ycharts.com/charts/73c4087654165ec2cf77ff55feabf37a.png"/></p> <p>AMZN PE Ratio (Forward) data by YCharts</p> <p>At the same time, Amazon has two attractive market-leading businesses: e-commerce and cloud computing. The company is best known for its e-commerce business, where it sells both its own goods and acts as a marketplace for third parties to sell products. Amazon has become the dominant global player in e-commerce due to its unparalleled logistics and warehouse network.</p> <p>Meanwhile, it is now using artificial intelligence (AI) to become more efficient in these areas. For example, the company is using AI to better plan routes for its delivery drivers, even predicting potential traffic and road closures. But it goes beyond even that, with the company using AI to predict which warehouses to store items in order to reduce travel distances. </p> <p>In the warehouse, meanwhile, the company is using AI and computer vision to improve efficiency and lower labor costs. AI-powered robots can handle a number of tasks, such as lifting heavy objects, sorting, and carrying packages, without taking breaks and making fewer mistakes than humans. Amazon even has AI-powered robots that can recognize damaged goods three times better than humans, preventing them being shipped and reducing costly returns. </p> <p>All this is helping to reduce costs and speed up delivery times. At the same time, the company is also using AI to help third-party merchants on its platform more easily list items and to target potential buyers through its sponsored ad network.</p>  <p>Amazon has grown to become one of the largest digital ad platforms in the world, and the growth of this high-margin business, together with its AI efficiencies, is leading to strong operating leverage in Amazon's e-commerce business. This could be seen last quarter, when its North American segment revenue rose 8%, while its segment operating income climbed 16%. </p> <h2>Cloud computing is a growth driver</h2> <p>While it's most known for its e-commerce operations, Amazon's largest, fastest-growing segment by profitability is its cloud computing business, Amazon Web Services (AWS). Amazon created the whole cloud computing, infrastructure-as-a-service business model out of its own frustrations scaling up its business and the infrastructure bottlenecks it ran into. Today, it remains the largest cloud computing provider, with a nearly 30% market share. </p> <p>AWS continues to benefit from strong momentum in cloud computing, a big part of which is being driven by AI. Customers are using its services like Bedrock and SageMaker to build and deploy their own AI models and applications. Bedrock gives them access to top foundation models they can customize, while SageMaker is more of an end-to-end solution that lets them build, train, and launch models from the ground up. Once these models and apps are live, they are then run on AWS infrastructure. </p> <p>One advantage Amazon has is that it has developed its own custom AI chips through its Annapurna Labs subsidiary. It has one chip, Trainium, that has been designed to train large language models (LLMs), and another, Inferentia, that has been optimized for inference.</p> <p>Custom chips perform better and use less power than mass-market graphics processing units (GPUs) on the specific tasks for which they've been designed, which helps lower the overall cost of ownership. This gives Amazon a cost advantage over its competitors, and should lead to strong operating leverage in this segment as well. </p> <p>Meanwhile, the company is investing heavily to build AI infrastructure to keep up with the continued rising demand.</p> <h2>Should investors buy Amazon stock?</h2> <p>Buying Amazon stock is not without risks, as its e-commerce business does face potential tariffs and economic headwinds, while there is always the potential that the company overbuilds its AI infrastructure. That said, this is a company that has a history of spending big to win big, and if history is any indication, it should be a big AI winner.</p> <p>While its valuation is not quite as low as when Ackman bought shares, the stock is still attractively valued. As such, I think investors can still follow Ackman into Amazon stock and be buyers at current levels.</p>                                                                            </div>

AMZN

AMZU

<p>Billionaire Bill Ackman's Pershing Square Capital Management has taken a significant stake in Amazon, viewing it as a "fantastic franchise" at an "extremely attractive" valuation. Despite Amazon's stock price recovery, it remains at one of its lowest valuations historically. The company is leveraging AI to enhance efficiency in e-commerce and cloud computing, with AWS being a major growth driver. However, potential risks include tariffs and economic challenges that could impact its e-commerce business. Investors are left to consider whether to follow Ackman into Amazon stock at current levels.</p>

- Billionaire Bill Ackman's Pershing Square Capital Management acquired a significant stake in Amazon following a market downturn caused by tariff announcements.  
- The investment is viewed positively due to Amazon's strong e-commerce and cloud computing segments, which are enhanced by AI efficiencies, leading to improved profitability.  
- Despite potential risks from tariffs and economic challenges, the stock remains attractively valued, suggesting that investors may consider buying Amazon shares.

Should You Follow Billionaire Bill Ackman Into Amazon Stock?