Amazon shares fell nearly 8% in premarket trading on Friday, as the company’s aggressive capital expenditure plans intensified investor concerns over Big Tech’s surging AI investment cycle.
Industry-wide spending on artificial intelligence is estimated to exceed $600 billion this year, raising doubts about the timing and scale of returns from such vast outlays, particularly as profitability pressures mount.
Investors are also wary that rapidly advancing AI tools could undermine demand for traditional software, compressing margins and contributing to a broader selloff across the technology sector.
Unlike the confident messaging from Alphabet on its investment strategy, Amazon Chief Executive Andy Jassy struck a more defensive tone during the post-earnings call.
Jassy highlighted the scale advantage of Amazon Web Services, noting that 24% year-on-year growth on a $142 billion annualized revenue base is materially different from higher growth rates posted by smaller competitors.
AWS revenue rose to $35.6 billion in the December quarter, while Google Cloud grew 48% to $17.75 billion and Microsoft Azure advanced 39% over the same period.
Analysts at MoffettNathanson said the scale of planned investment suggests strong demand signals, but warned the margin for execution error is narrowing as spending accelerates.
Following the results, at least five brokerages cut their price targets on Amazon, which trades at a price-to-earnings ratio of 27.0, compared with Microsoft’s 21.6 and Alphabet’s 28.4, underscoring ongoing valuation and return concerns among investors.
