Russ Mould, investment director at AJ Bell, said: “It’s been obvious for a while that the market isn’t a fan of huge AI spending commitments from the big tech contingent and the reaction to Amazon’s latest update is just the latest example.
“Piling billions into artificial intelligence, in what seems a never-ending spending splurge, has the feel of a kid let loose in a candy shop. The damage done to Amazon shares in pre-market trading is the equivalent of a stern rebuke from a parent.
“The scale of Amazon’s proposed outlay for 2026 is unquestionably astonishing and, significantly, is even more than rivals like Google and Microsoft have committed to.
“All the hyperscalers are competing to win the AI race, for which the prize could be significant. However, investors are being asked to countenance enormous amounts of cash going out the door in service of this goal.
“With the exact direction and trajectory of artificial intelligence still uncertain there is understandable concern that this money could be wasted.
“Compounding matters, Amazon’s earnings for the last three months of 2025 and outlook for the current quarter were weaker than anticipated. One silver lining was cloud computing which saw better growth than the market had expected.
“Amazon needs to demonstrate AI spending can give it the kind of edge Google-owner Alphabet has recently carved out with its Gemini chatbot and custom-made chips. Amazon’s own efforts in this area have not been as well received to date.”
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