Amazon shares plunged 8% in premarket trading on Friday after the company disclosed aggressive capital spending plans that intensified investor anxiety over Big Tech’s race to expand artificial intelligence capabilities. Market commentary highlights that corporate investment in AI this year is estimated to top $600 billion, raising concern among investors that the returns on these enormous expenditures may not materialize quickly.
Investors are also worried that rapid improvements in AI tools could reduce demand for traditional software products, placing pressure on profit margins across technology firms and contributing to a broader selloff in the sector.
Amazon’s planned capital expenditures are expected to reach $200 billion in 2026. Alphabet indicated its own spending may double from the previous year, while Meta and Microsoft have also announced increased spending plans.
Analysts at MoffettNathanson cautioned that while rising capital intensity was directionally expected, the scale of the planned spend exceeded consensus expectations. In their note, they said, "While the rising capital intensity is not a surprise directionally, the magnitude of the spend is materially greater than consensus expected."
The tone from company executives varied. Amazon CEO Andy Jassy offered a defensive comparison on the post-earnings investor call, urging investors to remember that, "it’s very different having 24% year-over-year growth on $142 billion annualized run rate, than to have a higher-percentage growth on a meaningfully smaller base, which is the case with our competitors." AWS revenue grew to $35.6 billion in the December quarter.
By contrast, Google Cloud reported 48% growth to $17.75 billion in the quarter, and Microsoft’s Azure rose 39% over the same period.
MoffettNathanson added a cautionary note on the scale of Amazon’s plans: "We do not think they would be spending $200B in FY26 if they did not have the appropriate demand signals, but the margin of error is shrinking."
Market reactions extended beyond share price movement. At least five brokerages reduced their price targets for Amazon following the earnings report and spending outlook.
Valuation comparisons noted that Amazon trades at a price-to-earnings ratio of 27.01, versus Microsoft at 21.62 and Alphabet at 28.36.
Context on investment tools referenced in the earnings coverage
The discussion around Microsoft included mention of an AI-driven stock selection tool that evaluates companies using numerous financial metrics and seeks to identify favorable risk-reward opportunities. That commentary framed Microsoft within a broader conversation about investment strategies that emphasize fundamentals, momentum, and valuation.
As capital expenditure plans across major technology companies grow, investors and analysts are weighing demand signals, near-term margin risk, and the possibility that rapid AI improvement will reshape software consumption patterns. Those considerations are contributing to heightened market sensitivity to earnings and spending announcements in the sector.