Amazon.com, Inc. (AMZN) shares traded nearly flat on Thursday, hovering around $238, as the company's latest financing deal for artificial intelligence infrastructure took center stage. The stock, which fell 2.53% on Wednesday to close at $238.00, showed little movement in the current session, fluctuating between $235.25 and $240.50. The broader market sell-off on Wednesday, with the S&P 500 dropping 1.62% and the Dow losing 1.87%, weighed on big tech stocks, but Amazon found some footing on Thursday as tech stocks rebounded.
Amazon secured a $17.5 billion delayed-draw term loan facility, according to a June 8 filing, with lenders including Citibank, BofA Securities, JPMorgan Chase, HSBC, and Wells Fargo. The company stated the funds are intended for general corporate purposes, but the timing underscores Amazon's aggressive push into AI infrastructure. Commitments under the facility expire on September 30, 2026, unless drawn earlier, and loans mature three years after borrowing. The interest rate on term SOFR loans will range from 0.625% to 0.875%, depending on Amazon's credit ratings.
This debt comes on top of Amazon's recent C$14 billion (approximately $10.04 billion) bond issuance in Canadian dollars earlier this week, marking the largest corporate bond sale in Canada. The five tranches span maturities from 2029 to 2056, signaling Amazon's appetite for long-term capital as it scales its AI and cloud computing capabilities.
The heavy AI spending is taking a toll on Amazon's free cash flow. For the trailing 12 months, free cash flow plummeted to $1.2 billion from $25.9 billion a year earlier, a decline driven by a $59.3 billion year-over-year increase in property and equipment purchases, largely tied to AI investments. Despite this, Amazon's earnings base remains robust. First-quarter net income surged to $30.3 billion, or $2.78 per share, up from $17.1 billion, or $1.59 per share, in the same period last year. AWS operating income also rose to $14.2 billion from $11.5 billion, highlighting the strength of Amazon's cloud business.
Investors are weighing whether Amazon's $17.5 billion loan signals confidence in its AI strategy or underscores the escalating costs of competing in the cloud and AI space. The stock's muted reaction suggests the market views the financing as expected, but the focus remains on how AI spending will impact future profitability and cash flow. Amazon's ability to sustain such heavy investment while maintaining strong earnings will be key for investor sentiment.
Tech stocks found some stability on Thursday, with the Invesco QQQ Trust (QQQ) gaining 2.27% and the SPDR S&P 500 ETF Trust (SPY) rising 1.18% in afternoon trading. This broader recovery helped Amazon avoid further declines, but the stock's price action remains tethered to AI spending narratives.
Looking ahead, Amazon's capital allocation strategy will be closely watched. The company's debt issuance, combined with its massive capital expenditures, raises questions about the balance between growth and financial discipline. However, Amazon's strong earnings base and market position provide a buffer as it navigates this capital-intensive phase.
