①Amazon's stock is currently experiencing a severe sell-off as investors express concerns over the tech giant's aggressive AI spending plans; ②On Friday, Amazon shares fell for the ninth consecutive day, marking the longest losing streak since July 2006; ③As of Thursday, Amazon’s stock had entered a technical bear market, becoming the second of the 'Magnificent Seven' US stocks to fall into a bear market this year after Microsoft.
Cailian Press, February 14 (Edited by Bian Chun) Amazon’s stock is currently experiencing a severe sell-off as investors express concerns over the tech giant's aggressive artificial intelligence (AI) spending plans.
On Friday, Amazon shares dropped by 0.41% to close at $198.79, marking the ninth consecutive day of declines and setting the record for the longest losing streak since July 2006. During this period, the stock price plummeted by 18.2%.
For context, in 2006, Amazon launched its cloud computing platform AWS. This decision faced criticism from many investors who believed the costs were too high, would squeeze profits, and showed no immediate return on investment at the time. Some even questioned whether Amazon’s then-CEO was 'completely out of his mind.'
Amazon began separately disclosing AWS financial data starting in 2015. By the first quarter of 2016, AWS’s profitability had surpassed that of Amazon’s entire North American retail business, despite its smaller revenue scale. Today, AWS has an annualized revenue scale of $142 billion.
Nearly 20 years later, similar criticisms have resurfaced. In a recent earnings call, Amazon CEO Andy Jassy announced that to meet growing demand for AWS, the company needs to make significant investments in building AI infrastructure.
Currently, investors are concerned that Amazon’s planned capital expenditure of $200 billion for this year could deplete its cash reserves and may even force the company to take on debt. High capital expenditures could also bring risks of depreciation for chips and servers, potentially increasing expenses over the next few years.
As of Thursday, Amazon’s stock had fallen into a technical bear market, becoming the second among the 'Magnificent Seven' US stocks to enter a bear market this year following Microsoft. Microsoft's shares fell into a bear market on January 29, a day after the company reported Azure cloud business growth that fell short of investor expectations.
The four major US technology giants — Amazon, Microsoft, Meta, and Alphabet — are projected to collectively spend $650 billion in AI-related capital expenditures by 2026. Among them, Amazon plans the highest capital expenditure for 2026, reaching $200 billion.
For Amazon and other companies within the 'Magnificent Seven,' alleviating investors’ concerns about excessive spending will require demonstrating tangible returns on their investments. However, such returns may take years to materialize.
Jassy called on investors to exercise patience during the earnings call on February 5. Referring to the company's AI investments, he stated: "We are confident that these investments will yield substantial returns. We have already achieved this in our core AWS business. I believe the same will hold true in the AI domain."
