Amazon Thinks AI Is About to Change the Way We Shop. Goodbye, Search Bar.

Amazon’s (AMZN) retail boss has a simple way of explaining where online shopping is headed. Doug Herrington, CEO of Amazon’s Worldwide Stores, keeps a Sears catalog from around 1910 in his office. It held roughly 20,000 items, and to buy something, you wrote down a number and mailed in an order form. The point he makes with it is that every way of shopping eventually hits a ceiling. The catalog gave way to the search bar, and now, he argues, the search bar is giving way to conversation. 

That shift is Amazon’s push into conversational AI, offered to shoppers as Alexa for Shopping. Instead of typing keywords and scrolling through listings, customers can ask a question in plain language and get a personalized answer they can buy from directly. Simple questions are answered instantly, like checking when your latest order will arrive. But it's built for more complex questions too. Ask it to compare two types of blenders, and it weighs the options for you, then points to one that suits your kitchen and how you cook. Herrington stated that you can go even further. He described snapping a photo of his fridge and asking Alexa for Shopping to suggest a weekly grocery order. It managed to build a list by working out that he cooks for two and prefers fresh food.

The Idea Is Already Showing Results

And this is more than just a vision. The assistant, formerly known as Rufus, was used by more than 300 million customers last year. As per Amazon, it drove roughly $12 billion in additional annualized sales, with shoppers using it being around 60% more likely to complete a purchase. Usage has kept growing quickly since. 

Amazon isn’t the only one chasing this, though. OpenAI, Google (GOOG) (GOOGL), and Perplexity are all building shopping into their own AI tools, which threatens Amazon’s spot as the place people start a product search. CEO Andy Jassy argues that shoppers will still prefer a retailer’s own assistant. He believes that advertising will thrive in this format, since each conversation opens fresh chances to surface products. That advertising bet is already paying off, with the business growing 26% last quarter to nearly $20 billion. The broader push is backed by heavy investment, with Amazon lifting its planned spending for the year to $220 billion, much of it going toward AI infrastructure.

About Amazon Stock 

Amazon is a multinational technology company best known for its online shopping platform. It also operates several other businesses. It has three main segments. The North America segment offers retail sales of consumer products, including from sellers, advertising, and subscriptions through online and physical stores. The International segment is similar to the North America segment but serves customers in countries outside North America. The Amazon Web Services segment provides cloud computing services such as data storage, databases, and computing power to businesses, startups, governments, and universities around the world. Founded in 1994, the company is headquartered in Seattle, Washington. 

Over the past year, AMZN stock has climbed roughly 13%, marginally underperforming compared to the S&P 500’s ($SPX) gain of 19% during the same period. The underperformance was due to investors' concern about the company’s aggressive AI spending, which weighed on free cash flow and raised questions about near-term returns.
 

Amazon’s valuation looks mixed. The forward GAAP price-to-earnings (P/E) of 21.16x lacks a meaningful 5-year average to compare against, since years of heavy investment have distorted its GAAP earnings. The forward price-to-sales (P/S) ratio of 3.42x sits about 18% above its 5-year average of 2.89x. Its modest premium reflects investors’ confidence in Amazon’s AI-driven growth across cloud, advertising, and retail. The EPS outlook, although volatile, seems mostly positive. Analysts expect strong growth of 74% in 2026, followed by an earnings decline of 17% in 2027, and then climbing again by 29% in 2028. That 2027 dip reflects a high 2026 base along with the weight of heavy AI investment, rather than any real weakening in the business. The capital structure carries more weight than it once did. Amazon holds about $123 billion in cash against $252 billion in debt. 

When I covered the company’s valuation recently, it had a net debt of about $92 billion. It has since risen to roughly $129 billion. That widening in the gap reflects aggressive borrowing behind Amazon’s AI buildout. Still, for a company generating cash flow at this scale, the debt remains manageable. For investors, the modest premium is easier to justify if Amazon’s AI bet keeps paying off the way its recent quarter suggested. But the uneven earnings path and rising debt are also worth watching closely.

Amazon Bets Bigger on AI With $220 Billion Capital Spending Plan

Amazon reported its second-quarter fiscal 2026 earnings on July 30. It reported stronger-than-expected results, with revenue of $200.6 billion, ahead of Wall Street estimates of $196.16 billion. The earnings per share came in at $5.75, comfortably beating the Wall Street consensus of $1.81. The company’s revenue rose 20% from a year earlier, and operating income climbed 43% to $27.5 billion. Segment-wise, the company also performed well. North America revenue was $116.2 billion, up 16% year-over-year (YoY), while International revenue was $42.2 billion, up 15% YoY, excluding foreign exchange. AWS revenue was $42.2 billion, up 36.7% YoY. The company’s capital expenditures were $53.1 billion, mainly for AWS and generative AI. 

Looking forward, for the third quarter, the company expects net sales between $197 billion and $202 billion and operating income between $22.5 billion and $26.5 billion. However, the management said the quarter-to-quarter slowdown from Q2 to Q3 reflects two main factors. These include the shift in Prime Day timing and a foreign exchange headwind. AMZN also raised its full-year 2026 cash capital expenditures forecast to about $220 billion from $200 billion. The increase reflects higher memory costs and continued investment in AI and cloud infrastructure. 

What Do Analysts Expect for AMZN Stock?

Since the company’s quarterly results, Wall Street has remained positive on AMZN stock. Citi analyst Ronald Josey reiterated a “Buy” rating and assigned a price target of $325. The analyst assigned a “Buy” rating due to a combination of factors, starting with the company’s strong second-quarter performance that exceeded expectations on both revenue and operating income. He said the company’s AWS segment is performing well and margins remain high. Moreover, he also noted that demand for AI-related services and custom chips is growing rapidly, with these businesses now generating more than $25 billion in annual recurring revenue. 

Based on 57 Wall Street analysts covering the stock, AMZN holds a consensus “Strong Buy” rating. Out of those, 49 have a “Strong Buy” rating, six have a “Moderate Buy” rating, and two have a “Hold” rating. The median price target of $325.86 reflects an additional 25% upside from the current level. The high price target of $400 implies 53% upside from the current share price.