Amazon’s stock took a hit on Friday, dropping approximately 4% following concerns over its significant spending plans for artificial intelligence (AI) and a weaker-than-expected sales forecast for the upcoming period.
Despite the decline, the company’s stock has increased by nearly 30% over the past year.
Spending Over $100 Billion for AI Expansion
During the company’s earnings call on Thursday, Amazon’s CEO, Andy Jassy, revealed that the tech giant plans to invest more than $100 billion in capital expenditures this year. Most of this spending will focus on expanding AI infrastructure to enhance its capacity.
While analysts have largely remained optimistic about Amazon’s future growth, some lowered their price targets after the announcement of the hefty investment and the soft sales outlook.
Analyst Reactions to Amazon’s Forecast
Citi analysts, who have maintained a “buy” rating for Amazon, expressed concerns about the company’s plans. They stated that expanding AI infrastructure could help ease capacity constraints and allow Amazon Web Services (AWS) to grow at a faster rate. However, they lowered their price target to $273 from $275 due to the company’s weaker-than-expected sales forecast.
Similarly, JPMorgan analysts expressed confidence in Amazon’s AI spending, citing a clear path to monetization through AWS. However, they adjusted their price target to $270 from $280, lowering their net sales estimates for 2025 and 2026.
Amazon Joins Other Tech Giants in AI Spending
Amazon’s massive investment in AI comes as part of a larger trend among Big Tech companies. Alphabet, Google’s parent company, announced earlier this week that it plans to spend $75 billion on capital expenditures this year to expand its AI capacity. Meanwhile, Meta has pledged to invest between $60 billion and $65 billion, and Microsoft has committed $80 billion for its 2025 fiscal year.
The significant investments by major players in the tech industry underline the increasing importance of AI in driving growth. Morgan Stanley analysts highlighted that these companies must demonstrate measurable results to justify their spending.
Stock Movement and Future Outlook
Despite the 4% drop on Friday, Amazon’s stock remains up by nearly a third over the past 12 months, closing at $229.15.
As the tech sector continues to focus heavily on AI, the coming months will reveal how these investments pay off for Amazon and its competitors.
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