Amazon.com (NASDAQ: AMZN) has signed a long-term agreement with Generac Holdings to supply backup generators for its global network of data centers, with initial deliveries worth approximately $2.4 billion planned for 2027 and 2028.
The deal signals Amazon’s continued push to secure the physical infrastructure needed to support its rapidly expanding artificial intelligence and cloud computing ambitions.
Amazon shares have been volatile in recent weeks, with the 30-day return down 3.18%, even as the stock has gained 10.90% year to date and delivered a three-year total shareholder return of approximately 94%.
Recent headlines covering heavier AI data center spending, new fixed income offerings, and new wage commitments have prompted investors to reassess both the growth potential and the risk profile of the company.
The most widely followed valuation narrative on Simply Wall St places Amazon’s fair value at $475.09 per share, against a last closing price of $251.19, implying the stock is approximately 47% undervalued on that basis.
Analysts framing that view describe Amazon as a business of two distinct sides, with a high-margin segment covering AWS, advertising, and subscription services, and a lower-margin segment anchored by its retail stores and third-party seller operations.
The high-margin segment is expected to grow at 15% or more annually while sustaining profit margins in the 30% to 40% range, which supporters of the undervaluation thesis argue could drive significant profit expansion across the broader business.
The lower-margin retail side is projected to grow at a steadier 5% to 10% annually, constrained by profit margins below 5%, though it plays a crucial role in driving adoption across the wider Amazon ecosystem.
Taken together, that business mix could produce annual revenue gains of around 9% and net profit margins of approximately 15%, potentially implying revenues near $1 trillion and earnings of around $150 billion within five years.
A simpler valuation check places Amazon’s current price-to-earnings ratio at 20x, which sits above the global Multiline Retail sector average of 18.6x but well below a peer average of 30.1x and a suggested fair ratio of 33.4x.
Critics of the bullish view point out that the undervaluation thesis depends heavily on long-term cash flow assumptions that could be undermined if AI infrastructure spending compresses returns on capital.
Heavier debt commitments and rising wage obligations also represent genuine risks that could squeeze future cash flows and test the credibility of the $475.09 fair value estimate.
The Generac generator agreement, while locking in future capacity, also commits Amazon to significant capital expenditure at a time when investors are already scrutinizing the pace and scale of the company’s infrastructure buildout.
Recent share price choppiness appears to reflect not a rejection of Amazon’s AI growth story but rather a recalibration as markets weigh solid operating momentum against a more complex balance sheet and cost structure.
