Amazon bets on AI, but the market does not buy it

On February 5th, Amazon announced that its capital expenditure related to artificial intelligence (AI) will increase by nearly 60% to $200 billion by 2026, far exceeding Wall Street expectations. Following the announcement, the company’s stock price fell about 10% in after-hours trading.

Many believe that the decline in Amazon’s stock is not due to a slowdown in performance but more reflects the market’s reassessment of the balance between massive capital investments in the AI era and long-term returns.

Amazon CEO Andy Jassy stated, “We are confident these investments will deliver strong returns.”

Currently, market sentiment has shifted to caution, with investors focusing less on short-term earnings and more on the growing scale of AI investments, slowing cloud business growth, and the uncertainty of return cycles.

It has been disclosed that Amazon’s net profit for the period reached $21.2 billion, in line with analyst expectations; its first-quarter operating profit guidance is between $16.5 billion and $21.5 billion. The company is working alongside tech giants like Microsoft, Meta, Google, and Oracle to accelerate data center construction and finance expansion to meet the explosive growth in AI computing demand.

According to disclosures and analyst estimates, these companies’ combined spending in 2026 will exceed $700 billion, nearly matching Japan’s annual budget and surpassing the government expenditures of Germany and Mexico.

The capital markets have responded with polarization: supported by improvements in advertising and other business areas, Meta and Google’s stock prices have been supported; meanwhile, Microsoft and Amazon are under pressure due to slower-than-expected growth in AI-related businesses.

In terms of core business performance, Amazon Web Services (AWS) revenue grew 24% year-over-year to $35.6 billion, maintaining steady expansion but significantly lagging behind Microsoft Azure (39%) and Google Cloud (close to 48%).

Although Amazon emphasizes that comparing growth rates alone does not reflect the company’s industry scale advantage, its data center capacity is quickly sold out once launched, indicating long-term demand. However, Microsoft has previously issued warnings that cloud growth is constrained by limited hardware supply needed for AI.

To support high-intensity AI investments, Amazon is simultaneously controlling costs and reorganizing its structure.

Since October last year, the company has laid off about 30,000 employees, roughly 10% of its total workforce, and in December restructured its AI division, with Peter DeSantis, who has nearly 30 years of Amazon experience and has launched several key cloud services, replacing Rohit Prasad to accelerate the rollout of AI services and custom chips.

On the business front, Amazon has closed Fresh and Go grocery stores, reduced the application of Amazon One palm print payments in retail scenarios, and focused resources on expanding Whole Foods, same-day grocery delivery, and data center construction.

Additionally, sources reveal that Amazon is in negotiations to invest up to $50 billion in OpenAI, which, if finalized, would further strengthen its position in the AI ecosystem.