Technology stocks staged a recovery on Friday, lifting cloud-focused exchange-traded funds by 2% to 4%. The First Trust Cloud Computing ETF (SKYY) led the advance with a 4.4% gain, while the WisdomTree Cloud Computing Fund and Global X Cloud Computing ETF rose 3.5% and 2.2%, respectively.
Amazon's Spending Plan Dampens Sentiment
Despite the sector-wide rally, Amazon shares declined 5.6%. Investors reacted to the company's ambitious plan to invest approximately $200 billion in artificial intelligence infrastructure during 2026. Analysts have expressed concern that this substantial capital outlay could pressure profit margins, with MoffettNathanson noting the figure is "materially greater than consensus expected."
Other major cloud players showed strength. Snowflake surged 7.5%, and Microsoft added 1.8%. The market's divergent moves highlight a growing focus on separating companies poised to benefit from increased data center demand from those bearing the heavy costs of expansion.
Broader Market Context and Risks
The rally in cloud shares contributed to a broader market upswing, with the Dow Jones Industrial Average closing above 50,000 for the first time. However, the sector remains sensitive to macroeconomic shifts. Upcoming U.S. jobs data and the January consumer price index report, due Wednesday and Friday, could alter interest rate expectations and impact high-growth technology valuations.
Investor rotation has been a dominant theme, with many using cloud ETFs to gain diversified exposure and mitigate single-stock risk. Nevertheless, analysts caution that if the market begins to view cloud giants as increasingly capital-intensive businesses, sector valuations—particularly for firms trading at high multiples—could face continued pressure.
Looking ahead, the market's focus will split between corporate earnings, with Datadog yet to report, and the incoming economic indicators that will shape the Federal Reserve's policy path.
