Amazon.com's stock price rose over 1% at the close on Tuesday, ending a nine-day consecutive decline during which its market capitalization plummeted by hundreds of billions of dollars.
Between February 2 and last Friday, the company's market value dropped by approximately 18%, marking its worst losing streak since 2006. The decline erased more than $450 billion in value as investors raised concerns about the rationale behind its artificial intelligence investment plans.
The sell-off in Amazon.com shares is directly linked to the fourth-quarter financial results released earlier this month.
Amazon.com indicated that it expects capital expenditures to reach $200 billion this year, an increase of nearly 60% compared to last year and over $50 billion higher than Wall Street expectations. A significant portion of these funds will be allocated to AI-related projects, including infrastructure such as data centers, chips, and networking equipment.
Investors are growing increasingly worried about the massive AI investments by technology companies and the associated risks of squeezing or even depleting free cash flow.
Combined capital expenditures from Google parent Alphabet, Microsoft, Meta, and Amazon.com this year are projected to reach $700 billion, as each company accelerates its infrastructure expansion.
On Tuesday, Alphabet and Microsoft both saw their stock prices fall by more than 1%, while Meta's stock closed down less than 1%. Both Microsoft and Alphabet have now closed lower for five consecutive trading days.
Amazon.com CEO Andy Jassy defended the company's substantial spending, stating during an analyst call that he is confident these investments will yield significant returns on capital.
Amazon Web Services CEO Matt Garman also justified the increased expenditures, explaining in an interview last week that the rise in capital spending will allow the company to capitalize on AI opportunities in the cloud computing sector.
In a research note following Amazon.com's fourth-quarter earnings report, Wedbush analysts wrote that the company is currently in a "prove-it phase," needing to demonstrate to investors that its capital expenditures can generate returns.
"While investors digest this guidance, spending growth will remain a headwind for the stock. More tangible returns may be needed before market confidence is restored," the firm noted, while maintaining an outperform rating on Amazon.com shares.
Andrew Boone, Managing Director and Research Analyst at Citizens Financial Group, expressed continued optimism toward AWS despite the recent stock decline. Citing Jassy's remarks, he noted that Amazon.com plans to double its data center capacity by 2027—an underappreciated growth driver for its cloud business. "We believe AWS revenue growth will accelerate further as more capacity comes online," Boone stated in an interview.