Why Wall Street’s Biggest Hedge Funds Are Ditching AI Hype for Amazon Stock

Posted on by

(SeaPRwire) –   By: Christian Pierce

Amazon’s stock is up just 1.5% so far in 2026. It trails the S&P 500 by a wide margin. It also lags every major AI-related peer this year. Most investors are chasing the next generative AI hype play. They’re ignoring a stock that’s flying under the radar. But some of Wall Street’s most respected hedge funds have made Amazon their single largest holding. That’s the central tension driving this market moment.

Let’s break down the hard numbers. David Tepper’s Appaloosa and Seth Klarman’s Baupost each list Amazon as their top holding. Bill Ackman’s Pershing Square built a $2.4B Amazon position over the past year, its second-largest holding. Sanders Capital, led by former AllianceBernstein CEO Lewis Sanders, doubled its stake to 29.8 million shares, worth $6.2B in Q1 2026. Cathie Wood’s ARK funds bought 41,141 Amazon shares for ~$9.6M on June 23, during a broad tech sell-off that hit AI and semiconductor names. AWS grew 28% year-over-year in Q1 2026 to $37.6B, its fastest growth in over three years. Amazon beat Wall Street’s EPS estimate of $1.64, posting $2.78 per share, on $181.5B in total revenue, up 17% YoY. The company’s contracted revenue backlog hit $364B, not including Anthropic’s $100B+ 10-year AWS commitment. Amazon plans $200B in 2026 capex, mostly for AWS infrastructure. The stock trades at 27x forward earnings, higher than peers like Microsoft, Nvidia, and Meta. Even so, Morgan Stanley says Amazon trades at a discount when factoring in expected profit growth. BofA maintains a Buy rating with a $310 price target, citing sum-of-the-parts valuation anchored to AWS. Some bears have bailed: Berkshire Hathaway cut its Amazon stake to zero, while Stanley Druckenmiller cut his common position by 94% but doubled his call options to 200,000 shares. Overall, institutional investors added 253 million Amazon shares in the most recent quarter.

The core bull case rests on the sum-of-the-parts valuation. AWS alone is worth roughly half of Amazon’s $2.5T market cap, per ValueWorks founder Charles Lemonides. The retail, advertising, and media arms come at no extra cost to investors. The 28% Q1 growth for AWS shows the cloud segment is firing on all cylinders, with a backlog that guarantees steady revenue for years. The $200B in 2026 capex is an investment that will only strengthen AWS’s dominant market position. Hedge funds aren’t buying for a short-term pop. They’re betting the market will finally re-rate Amazon’s stock to match its underlying assets. The lagging share price isn’t a red flag—it’s a discount for investors willing to look past the current AI frenzy. The rest of the market will catch up soon.

Author bio: Christian Pierce, chief financial columnist and markets commentator with 15 years covering global equity and hedge fund activity.