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- Amazon’s blowout $200 billion AI spending plan stuns Wall Street (businessinsider.com)
Amazon’s Massive AI Investment Spooks Investors, Stock Takes a Dive
SEATTLE, WA – Amazon sent shockwaves through Wall Street on Thursday by announcing a colossal $200 billion capital expenditure plan for the year, an amount significantly higher than analysts anticipated. This bold move, largely driven by the burgeoning artificial intelligence (AI) sector, has ignited concerns about the sustainability and potential returns on these massive investments, leading to a more than 10% slump in the company’s stock.
The tech giant’s capex forecast exceeded Wall Street expectations by over $50 billion, prompting unease among some analysts regarding the payoff of such substantial outlays. Mark Mahaney, a tech analyst at Evercore ISI, pressed Amazon executives during a conference call for more insight into how investors would see the long-term returns on this capital.
Amazon CEO Andy Jassy defended the strategy, emphasizing that new AI capacity is being monetized rapidly, calling it a “very unusual opportunity.” He argued that AI adoption is accelerating the shift of customers to the cloud and highlighted AWS’s experience in forecasting demand to minimize wasted capacity.
“This isn’t some sort of quixotic top-line grab,” Jassy stated, expressing confidence that these investments would yield strong returns.
However, Jassy’s assurances did little to calm investor jitters. Amazon shares fell sharply in extended trading after the announcement, further impacted by a profit forecast that also fell short of Wall Street estimates.
This aggressive spending by Amazon comes on the heels of other tech giants also significantly increasing their AI infrastructure investments. Google recently projected $175 billion to $185 billion in capex for 2026, while Meta and Microsoft have also boosted their own spending plans.
During the earnings call, other analysts, including JPMorgan’s Doug Anmuth, questioned Jassy about “financial guardrails” for the spending plan. Jassy reiterated that AI presents an “extraordinarily unusual opportunity” that could reshape the scale of AWS and Amazon. He noted that the company’s in-house chips, Trainium and Graviton, are expected to generate over $10 billion in revenue this year, and that its partnership with Anthropic has been “very well” received.
“We see this as an unusual opportunity, and we are going to invest aggressively here to be the leaders like we’ve been the last number of years,” Jassy asserted.
Jassy characterized the AI market as “barbelled,” with heavy spending by leading AI labs on one end and productivity-focused enterprise uses on the other. He believes that the middle ground – enterprise production workloads and new AI-native businesses – is still nascent but has the potential to become “the largest and the most durable” source of demand as costs decrease and adoption widens.
“The lion’s share of that demand is still yet to come in the middle of that barbell, and that will come over time,” he concluded.
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