Why Amazon's AI spending triggered the stock's worst slide in over a year

By Christine Ji

Amazon's AI spending plans have spooked investors and triggered a 16% selloff - but some believe the tech giant's $200 billion bet can pay off

Amazon's stock has seen its worst seven-day stretch since 2022, shedding over 16%.

Amazon.com's massive artificial-intelligence spending plans aren't sitting well with investors, as the stock falls deeper into negative territory for the year.

Shares of Amazon (AMZN) experienced their seventh consecutive day of losses on Wednesday. The stock ended the day at $204.20, down 16% from its closing price on Feb. 2.

It's the worst seven-day stretch for Amazon's stock since November 2022, when it fell 15.9%, according to Dow Jones Market Data. It would also be the longest losing streak since another seven-session one that ended Oct. 3, 2024.

While investor criticism of Amazon's AI strategy relative to the pace of its cloud growth dates back to last year, the company has doubled down on its approach. Amazon last week announced plans for $200 billion in capital expenditures this year, which is the largest projected amount from any of the megacap tech companies known as hyperscalers. The higher-than-expected AI capex surprised investors and overshadowed Amazon Web Services' improved 24% growth in the fourth quarter. Wall Street analysts are concerned that this level of spending will make Amazon the first among its cloud-giant peers to report negative free cash flow in 2026.

See more: Amazon's stock drops as investors question whether $200 billion can buy an AI edge

Investors got more details about Amazon's AI spending on Tuesday, when Astera Labs (ALAB) reported earnings and disclosed a $6.5 billion agreement with Amazon to supply the cloud provider with semiconductor connectivity solutions over a multiyear period.

Some analysts believe the negative sentiment surrounding Amazon is overdone. In a note last week, Deutsche Bank analyst Lee Horowitz wrote that "Amazon is not becoming more capital intensive," but rather staging a "pull-forward of capital that would have been deployed in the cloud over many years to drive the digital transformation of the economy."

For Amazon, the risk of underinvesting is much greater than overinvesting, Horowitz believes. Even if the company overshoots its needs, it would "simply grow into the capacity over time," he added. Horowitz has a $290 price target on the stock.

William Blair analyst Dylan Carden acknowledged the risks of Amazon's increased capex, writing in a note last week that shares will probably continue to experience an overhang until the company provides more visibility into AWS revenue acceleration or profitability. However, he posited that the uptick in spending could be indicative of Amazon's "inherent advantage in being able to retrofit existing AWS infrastructure," meaning that the company could bring capacity online faster than its peers.

Amazon shares also have high-profile backers on Wall Street. On Wednesday, Bill Ackman's Pershing Square disclosed stakes in Amazon and Meta Platforms (META), representing 13% and 10% of the fund's capital as of the end of 2025. According to Pershing Square's 2026 investor presentation, the fund initiated a position in Amazon's stock in April 2025 "at a highly attractive valuation." Shares of Amazon hit a 52-week low of $161.38 last April.

"AWS is the leading cloud hyperscaler in a highly concentrated market," Pershing Square said in its presentation. "We expect the company's planned doubling of data-center capacity through 2027 to be rapidly absorbed by compute demand from scaling AI inference workloads."

Read: Why Amazon's $6.5 billion chip deal with Astera Labs is a 'double-edged sword'

-Christine Ji

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02-11-26 1623ET