NEW YORK, May 22 (Reuters) - Billionaire investor Bill Ackman told clients on Thursday that his hedge fund bought Amazon shares last month, betting earnings will continue to grow at the online retailer as President Donald Trump's tariffs bite less than consumers initially feared.

Ackman and his investment team updated clients on additions to the portfolio at his hedge fund, Pershing Square Capital Management. "The most substantial move is Amazon," chief investment officer, Ryan Israel, said on a conference call.

With a value of over $2 trillion, Amazon is one of the world's most valuable companies and has long featured on Ackman's list of most admired businesses.

As one of the world's most voluble activist investors who often pushes companies to perform better, Ackman's stock picks are closely watched for investment trends.

But Amazon stock had been too costly until early April when the market was battered by news of Trump's heavy tariffs for imported goods and its price cratered.

"We felt that the company would be able to work through any slowdown in the cloud computing division Amazon Web Services and we did not judge that tariffs would have a material impact on the earnings in the retail business," Israel said.

Ackman and his team also expressed confidence in Amazon CEO Andrew Jassy, saying his ability to run the business more efficiently will allow for "more profit margin expansion at a high rate of revenue growth."

Pershing Square had also added stakes in car rental company Hertz HTZ.O and transport company Uber UBER.N into the portfolio.

At the same time, the firm sold out of railroad Canadian Pacific CP.TO, Ackman said, noting that it is a position the firm sold "with regret". Ackman in 2022 built a new stake in Canadian Pacific, returning to one of his most profitable investments as rail firms eye a boost from the drive to cut carbon emissions and as manufacturing is brought back to the United States and Mexico from abroad.

But in order to buy the Amazon stake, Ackman needed to make adjustments and came to liquidate Canadian Pacific. He stressed that he thinks "extremely highly of the Canadian Pacific team" and has "a very strong belief in the long-term future of the business."

The team also trimmed investments in Chipotle Mexican Grill CMG.N, Hilton Worldwide Holdings HLT.N, Universal Music Group UMG.AS and swapped the firm's Nike NKE.N stock into call options, calling it a "deep-in-the-money strategy."