Amazon shares plunge 4% after AI investment plans
Amazon plans $100B AI investment
Amazon shares fell 4% on Friday after the company announced plans to increase capital expenditures to over $100 billion in 2024, primarily to expand its artificial intelligence (AI) infrastructure.
While analysts remain optimistic about Amazon’s long-term growth, some lowered their price targets, citing concerns about higher spending and a softer-than-expected sales outlook, reports Investopedia.
$100 Billion Investment in AI Infrastructure
During Amazon’s earnings call on Thursday, CEO Andy Jassy confirmed that most of the company’s $100 billion capital expenditure will be directed toward AI and cloud computing, as Amazon Web Services (AWS) seeks to alleviate capacity constraints and accelerate growth.
JPMorgan analysts expressed confidence in Amazon’s long-term AI monetization strategy, stating that the increased investment is justified. However, they adjusted their price target from $280 to $270, also lowering their 2025 and 2026 sales estimates.
Wall Street’s Reaction: Lowered Price Targets
Despite maintaining a “buy” rating, Citi analysts also trimmed their price target from $275 to $273, citing Amazon’s weaker sales forecast and aggressive spending plans. Meanwhile, Morgan Stanley analysts kept an "overweight" rating and a $280 price target, emphasizing the importance of Amazon’s ability to drive AI-related engagement and revenue growth.
Amazon’s spending plans are in line with similar investments from other tech giants. Alphabet plans to spend $75 billion on AI and infrastructure in 2024. Microsoft announced an $80 billion investment for fiscal year 2025. Meta expects to allocate between $60 billion and $65 billion this year.
Following the earnings call, Amazon’s stock dropped 4% on Friday, closing at $229.15. However, despite the decline, AMZN shares have still gained nearly 30% over the past year.
Reminder, A.P. Moller-Maersk's stock surged 8% after announcing a $2 billion share buyback program and a dividend payout of DKK 1,120 per share (10% yield).
