Amazon reports over 50% jump in capital expenditure, raising investor concerns over its aggressive AI push.

Amazon’s shares fell 11.5% in after-hours trading on Thursday as it predicted a more than 50% increase in capital expenditure this year as it speeds up spending in artificial intelligence infrastructure. 

Big Tech’s AI expenditure binge is far from slowing down, according to the company’s outlook. With CEO Andy Jassy supporting the approach by citing the size of Amazon Web Services (AWS), which reported 24% year-over-year revenue growth on an annualized run rate of $142 billion, it is anticipated that Amazon will significantly increase expenditures in data centers, chips, and related infrastructure. 

In the December quarter, AWS revenue increased to $35.6 billion, surpassing Amazon’s overall growth and continuing to be the company’s primary source of profit. Amazon shares had already dropped 4.4% in regular trade due to investor fears over growing costs. 

Due in part to increased expenses associated with its satellite internet business, Amazon also predicted first-quarter operating income of $16.5 billion to $21.5 billion, which is below market estimates. To maintain investor trust, analysts cautioned that rising capital expenditures tied to AI must result in measurable financial gains. 

Amazon reaffirmed that strong investment is required to stay competitive in cloud computing and AI despite the market reaction, as competitors like Microsoft, Google, and Meta continue to increase investments. 

Source – The Financial Times