Up 27% in 1 Month, Amazon Is Now the Best-Performing “Magnificent Seven” Stock in 2026. 2 Reasons Why It’s a Buy in May, and 1 Reason to Avoid.

Amazon’s diversification is unique because it is an industry leader in both business-to-business (AWS) and consumer-facing industries (online retail, subscription services, healthcare, and so on). That variety gives virtually every enterprise and consumer an opportunity to be an Amazon customer, from small to multi-billion dollar cloud deals to loyal Amazon Prime subscribers, to seeing Amazon MGM Studios’ Project Hail Mary in theaters.

The pitfalls of aggressive capital allocation

Amazon’s diversification is a major reason why it’s such an attractive long-term investment opportunity. Unlike other major tech companies like Alphabet, Meta Platforms, Apple, Microsoft, and Nvidia, Amazon is notorious for not paying dividends and diluting shareholders through stock-based compensation that routinely exceeds stock buybacks. It’s definitely a red flag for balanced investors who value stock buybacks to accelerate earnings growth and generate passive income through dividends. But the strategy is Amazon’s way of betting on itself, and that has generally paid off more than it has backfired.

Amazon’s recent deals with Meta and Anthropic are a testament to its capital-intensive strategy — charting a path toward sustained market leadership for AWS. However, these wins come at a high price, as Amazon’s spending is soaring to stratospheric heights. Amazon now plans to spend $200 billion on capital expenditures in 2026, a more than 150% increase in two years. Amazon isn’t growing operating cash flow as quickly, which will mean it will likely report substantial negative free cash flow in 2026.

Amazon’s growth potential comes with risk

Amazon is the equivalent of a power hitter in baseball. It’s going to swing for the fences and hit a lot of home runs, but it’s also going to strike out a fair share of the time. That approach is how an online book store became the largest online retailer and cloud computing infrastructure company in the world, but it is also why investors can lose patience with Amazon when the strikeouts pile up.

Amazon, along with Tesla, are the most purely growth-focused Magnificent Seven companies, which will likely appeal to risk-tolerant investors. But Amazon is a poor fit for investors looking for consistent cash cows that are more disciplined with their capital allocation.

We just issued ‘double down’ alerts on 3 stocks — find out if Amazon made our list

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $542,766!*

• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $51,445!*

• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $496,797!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, available when you join Stock Advisor, and there may not be another chance like this anytime soon.

See the 3 stocks »

*Stock Advisor returns as of April 27, 2026

Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.

Up 27% in 1 Month, Amazon Is Now the Best-Performing “Magnificent Seven” Stock in 2026. 2 Reasons Why It’s a Buy in May, and 1 Reason to Avoid. was originally published by The Motley Fool