Amazon Falls After Vowing to Spend $200 Billion on AI This Year

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Amazon shares dropped after the company said it plans to spend $200 billion this year on data centers and other equipment, worrying investors the company’s colossal bet on artificial intelligence will pinch profits and may not pay off. The company reported spending roughly $130 billion on property and equipment in 2025. Analysts anticipated those expenses would reach about $150 billion this year. “With such strong demand for our existing offerings and seminal opportunities like AI, chips, robotics, and low earth orbit satellites, we expect to invest about $200 billion in capital expenditures across Amazon in 2026, and anticipate strong long-term return on invested capital,” Chief Executive Officer Andy Jassy said in a statement. Bloomberg Intelligence Senior Analyst for E-Commerce and Athleisure Poonam Goyal joins Bloomberg Businessweek Daily to discuss. She speaks with Carol Massar and Tim Stenovec. Amazon.com Inc. shares dropped after the company announced plans to spend $200 billion this year on data centers, chips and other equipment, worrying investors that its colossal bet on artificial intelligence may not pay off in the long run. The company reported spending roughly $130 billion on property and equipment in 2025. Analysts anticipated those expenses would reach about $150 billion this year. Chief Executive Officer Andy Jassy said the money “predominantly” would go toward the company’s Amazon Web Services cloud unit, and most of that spending would be for AI workloads.  “I think this is an extraordinarily unusual opportunity to forever change the size of AWS and Amazon as a whole,” Jassy said Thursday on a conference call. “We see this as an unusual opportunity and we’re going to invest aggressively to be the leader.” The spending will weigh on profits, with Amazon giving a forecast for operating income in the current quarter of $16.5 billion to $21.5 billion. Analysts, on average, estimated $22.2 billion. The shares fell about 8% in premarket trading after closing at $222.69 in New York. Amazon’s stock had declined 3.5% this year through Thursday’s close. Microsoft Corp. and Alphabet Inc., which reported results earlier, also spent more heavily than anticipated, sending their shares down amid mounting worries that demand for AI services doesn’t warrant the massive outlays. Read more: Microsoft Drops Most Since 2020 Amid Slowing Cloud Growth AWS revenue rose 24% to $35.6 billion — the biggest quarterly growth in more than three years, the company said in a statement. Operating income for the cloud unit was $12.5 billion. “The negative reaction is a result of bigger increases to capex than to AWS revenue,” said Gil Luria, an analyst at DA Davidson & Co. “Much like Microsoft, investors are concerned that investments are growing faster than returns, and that Amazon, Google and Microsoft are locked in an escalating build-out that may not work out for all of them.” Some of Amazon’s capital expenditures will go toward its effort to compete with SpaceX’s Starlink internet service by placing satellites in low-Earth orbit; increasing the use of robotics in its logistics operation to help speed e-commerce deliveries; and opening new Whole Foods grocery stores. But the bulk of the $200 billion will finance Amazon’s effort to meet demand for computing power from AI customers, Jassy said. The CEO said AWS had an order backlog, meaning sales it expects to recoup in the future, of $244 billion in the fourth quarter, an increase of 40% from a year earlier and up 22% from the previous period. “There is a lot of demand,” Jassy said. Total revenue increased 14% to $213.4 billion in the fourth quarter. Operating profit was $25 billion in the period, which ended Dec. 31. Still, Amazon’s e-commerce operation generates most of the company’s revenue. Online store sales jumped 10% to $83 billion, topping analysts’ average estimate of $82.3 billion, indicating the Seattle-based company continued to be a destination for internet shoppers despite stepped-up competition from other retailers. -------- Watch Bloomberg Radio LIVE on YouTube Weekdays 7am-6pm ET WATCH HERE: http://bit.ly/3vTiACF Follow us on X: https://twitter.com/BloombergRadio Subscribe to our Podcasts: Bloomberg Daybreak: http://bit.ly/3DWYoAN Bloomberg Surveillance: http://bit.ly/3OPtReI Bloomberg Intelligence: http://bit.ly/3YrBfOi Balance of Power: http://bit.ly/3OO8eLC Bloomberg Businessweek: http://bit.ly/3IPl60i Listen on Apple CarPlay and Android Auto with the Bloomberg Business app: Apple CarPlay: https://apple.co/486mghI Android Auto: https://bit.ly/49benZy Visit our YouTube channels: Bloomberg Podcasts: https://www.youtube.com/bloombergpodcasts Bloomberg Television: https://www.youtube.com/@markets Bloomberg Originals: https://www.youtube.com/bloomberg Quicktake: https://www.youtube.com/@BloombergQuicktake