Amazon’s substantial capital expenditure forecast sent its shares tumbling, fueling broader investor anxieties about the sustainability of the artificial intelligence boom. The e-commerce behemoth’s plan for significant spending surprised a market already on edge, concerned that the current AI fervor might be inflating into a speculative bubble.
This move by Amazon follows a trend among major tech players. Alphabet, Microsoft, and Meta have all signaled intentions for continued aggressive investment, collectively reporting approximately $120 billion in capital expenditures in the fourth quarter alone. Projections suggest this figure could surge past $660 billion for the current year, a sum that dwarfs the GDP of several nations.
The market’s reaction has been bifurcated. While Meta and Alphabet’s forward-looking spending plans were met with enthusiasm, Amazon and Microsoft faced investor reprisal. In the past week, the combined market capitalization of Amazon, Microsoft, Nvidia, Meta, Google, and Oracle has decreased by over $1 trillion, with Amazon bearing the brunt of the decline, shedding more than $300 billion from its valuation.
Paul Markham, investment director at GAM Investments, noted that hardware developers supporting the AI infrastructure build-out are likely to experience continued market volatility due to “sentiment contagion.” He added, “Questions surrounding the scale of capital expenditures driven by large language model development, the ultimate return on these investments, and the potential for eventual overcapacity will persist.”
**Investors Rethink AI Investment Strategies**
Amazon’s fourth-quarter earnings report revealed an expected capital expenditure of $200 billion for 2026, exceeding analyst predictions by over $50 billion. Despite management’s confidence in long-term returns, this lack of clear visibility has unnerved investors.
“We’ve shifted from a fear of being left behind to investors scrutinizing every aspect of this AI race,” observed Mamta Valechha, consumer discretionary analyst at Quilter Cheviot.
Analysts at D.A. Davidson downgraded Amazon’s stock to neutral from a buy rating, citing concerns about its spending trajectory, potential erosion of its cloud leadership, and the disruptive impact of AI on its retail operations. In a research note, they stated, “In light of recent results from Microsoft and Google, we anticipate AWS will continue to cede ground and is now compelled to accelerate investment to regain its footing. We are also increasingly apprehensive about Amazon’s retail business adapting to a new, chat-centric internet landscape dominated by platforms like Gemini and ChatGPT.”
In contrast, Apple, which has faced scrutiny over its AI strategy and has historically committed less capital expenditure compared to its Big Tech peers, has seen its stock price rise approximately 7% since Monday. This surge is attributed to what CEO Tim Cook described as “staggering” demand for the iPhone.
Michael Field, chief equity strategist at Morningstar, characterized the substantial investments in “Magnificent Seven” companies as a binary bet. “It’s either a significant payoff if these investments materialize successfully, or a considerable squandering of shareholder capital if they falter,” he commented.
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