Amazon shares sink as it prepares $200bn AI spending blitz

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Amazon’s shares slumped on Friday after it announced plans to spend $200bn on capital expenditures in 2026 to scale up its AI infrastructure, roughly a third more than Wall Street had forecast.

The Seattle-based tech group said capex would climb more than 50 per cent from nearly $130bn in 2025, having ploughed cash into building data centres this year. Analysts had expected about $150bn in capex for 2026.

Investors were spooked by the commitment, which exceeds rivals including Google and Microsoft. Amazon’s stock was down more than 9 per cent shortly after Wall Street’s opening bell on Friday, wiping out almost $220bn in the group’s market capitalisation.

Andy Jassy, Amazon’s chief executive, said the group was confident in its forecast of demand for computing power from its data centres and planned to increase spending on its custom AI chips, robotics and low Earth orbit satellites.

“We’re going to invest aggressively here . . . We’re going to invest to be the leader in this space,” Jassy told investors on a Thursday earnings call.

Huge increases in capital spending from Big Tech groups this week have rattled the US share market, alongside jitters around the impact of a shortage of memory hardware on chipmakers and the hit to software stocks from new AI workplace and coding tools.

Amazon’s earnings and outlook for the coming months were broadly weaker than expected, though its cloud unit posted strong growth.

They come after the ecommerce giant last week announced it would slash 16,000 white-collar jobs in a bid to reduce costs, taking the total cuts to 30,000 roles since October.

Net income for the group — which spans advertising, cloud computing, retail and media — came in at $21.2bn for the three months to the end of December, roughly in line with the previous quarter. Revenues increased 14 per cent to $213.4bn compared with the same period a year earlier.

Amazon’s retail unit was broadly in line with Wall Street expectations, with revenue of $141.7bn during the quarter, which included the busy holiday period.

Sales at Amazon Web Services, the company’s cloud division, rose 24 per cent to $35.6bn in the fourth quarter from the year before, ahead of Wall Street expectations.

AWS, which rents servers to businesses to run online services, has been the focus of investors’ attention as Amazon pours money into the AI race against its cloud rivals.

The group has lagged peers such as Microsoft and Oracle in signing blockbuster deals to supply computing power to AI players. Still, it is an investor and major cloud provider to Anthropic. In November, it agreed a $38bn contract with OpenAI and is in talks to invest in the start-up.

Jassy said that Amazon also hoped to “expand our partnership” with OpenAI over time.

He said AWS had added 4 gigawatts of data centre capacity in the past year. It had a $244bn backlog of cloud contracts, up from $200bn in the previous quarter, as customer demand outran the pace at which new capacity could be added, Jassy added.

Amazon said capex for the fourth quarter came in at about $38bn. The spending was above analysts’ estimates of $33.6bn, according to S&P Visible Alpha.

It forecast group revenues for the first quarter would fall between $173.5bn and $178.5bn, with the midpoint slightly above analysts’ estimates. But it forecast weaker profits than expected.

Amazon is also trying to compete with AI start-ups and rivals such as Google to produce its own models and in-house chips. It has invested in apps and tools including coding platform Kiro and its Nova family of AI models.

It also released the latest version of its Trainium series of AI chips late last year, but the hardware has not been received as well as Google’s TPU chips.

In December, Amazon said it would shake up AWS’s leadership with the departure of its AI chief and the creation of a new unit to oversee the company’s model development.