Amazon's Stock Takes a Dive Amid Revenue Miss and AI Spending Concerns

Amazon's stock experienced a significant drop of over 7% before the market opened on Friday following the release of its quarterly earnings report. While the company reported strong earnings per share, with a 94% increase year-over-year, revenue fell short of Wall Street's expectations. This disparity between earnings and revenue growth raised concerns among investors.

To address these concerns, Amazon's CEO, Andy Jassy, highlighted the potential of artificial intelligence (AI) to drive future growth, particularly within the company's cloud computing division, Amazon Web Services (AWS). AWS remains a major profit generator for Amazon, but its profit margin decreased by 2% due to increased investments in AI technology. This significant spending on AI equipment, which jumped 50% to $17.6 billion, has ignited investor scrutiny over the costs associated with AI development.

The market's growing sensitivity to AI spending is evident, with Amazon's increased expenditures following similar large-scale investments by tech giant Microsoft. Amazon's CFO, Brian Olsavsky, warned that the company's capital spending in the second half of the year will exceed the first half.

Despite the recent downturn, Amazon's stock has risen 22% year-to-date, and the company achieved a $2 trillion market valuation in late June.

Track all markets on TradingView