Amazon Shares fell more than 9% on Friday after the company’s hefty spending forecast surprised investors who were already wary of the risk that the artificial intelligence boom could turn into a bubble.
The e-commerce business THURSDAY has become the latest tech giant to announce plans to massively increase capital spending, following Google’s parent company. Alphabet, Microsoft And Meta all indicated they expected their spending sprees to continue.
Amazon, Alphabet, Microsoft and Meta reported approximately $120 billion in capital spending in the fourth quarter alone. This figure could exceed $660 billion this year. the Financial Times reported, which is higher than the gross domestic product of countries like the United Arab Emirates, Singapore and Israel.
Wall Street reacted differently to corporate spending plans, praising Meta and Alphabet’s forecasts while punishing Amazon and Microsoft.
Amazon, Microsoft, NvidiaMeta, Google and Oracle have collectively lost $1.35 trillion from their valuations over the past week, according to FactSet data.
Shares of companies developing hardware for AI development will likely experience continued volatility as “sentiment contagion takes hold,” Paul Markham, chief investment officer at GAM Investments, told CNBC.
“Questions about the scale of investment resulting from the construction of LLM, the possible return on investment and the fear of possible excessive expansion of capacities will persist,” he added.
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Amazon Stocks Over the Past Month
“Investors are questioning every aspect of the AI race”Amazon said in its fourth-quarter earnings report that its capital spending is expected to reach $200 billion in 2026, more than $50 billion above analyst expectations.
While management is confident In terms of long-term investment returns, the lack of visibility does not sit well with investors, Mamta Valechha, consumer discretionary analyst at Quilter Cheviot, said on Friday morning.
“We’ve suddenly gone from worrying that you can’t be last to investors questioning every aspect of this AI race.”
Appleon the other hand, who faced pressure from Wall Street on its AI strategy and has already committed much less investment than other big tech companies, has seen its shares jump 7% since Monday thanks to what CEO Tim Cook described as “Staggering” demand for iPhone.
“The bet is becoming binary,” Michael Field, chief equity strategist at Morningstar, told CNBC, referring to the huge investments in the so-called Magnificent Seven companies. “Either a big gain if these investments turn out well, or a huge waste of cash for shareholders if things go wrong.”
— CNBC’s Annie Palmer and Elsa Ohlen also contributed to this report.