Amazon shares fell 5.6% to $210.32 on Friday, underperforming during a session where the Dow Jones Industrial Average closed above 50,000 for the first time. The S&P 500 gained 1.97%, and the Nasdaq Composite rose 2.18%.
Spending Plan Sparks Investor Concern
The decline followed Amazon's projection that capital expenditures would rise over 50% to $200 billion in 2026, a significant jump from an expected $131 billion in 2025. This substantial investment plan, primarily aimed at artificial intelligence and data center infrastructure, prompted a sell-off as investors questioned the near-term returns on such heavy spending.
Amazon's underlying quarterly performance remained solid. The company reported fourth-quarter net sales of $213.4 billion, a 14% increase year-over-year, with operating income reaching $25.0 billion.
Market Shifts Focus to AI Profitability
The reaction highlights a broader shift in investor sentiment toward major technology firms. After years of rewarding aggressive growth spending, the market is now demanding clearer paths to profitability from massive AI investments. U.S. tech giants are projected to invest over $630 billion this year alone in AI chips and data centers.
While Amazon's stock retreated, other segments of the market benefited. Chipmaker Nvidia saw its shares surge 7.8%, and the Philadelphia SE Semiconductor Index climbed 5.7%, reflecting expectations of continued demand for AI hardware.
Trading in Amazon was volatile, with the stock dipping as low as $200.31 before recovering. Approximately 179 million shares changed hands during the session.
Looking Ahead: Data and Margins in Focus
Investors are now weighing whether this level of capital expenditure represents a new baseline for cloud and AI infrastructure providers. Key risks include the potential for rising depreciation and operating costs to pressure margins if anticipated revenue growth does not materialize promptly.
Attention now turns to upcoming economic data, including the January jobs report on February 11 and Consumer Price Index figures on February 13, which could influence interest rate expectations and impact valuations for growth-oriented stocks.
