What Happened to Amazon Stock?

Amazon.com Inc. suffered a sharp after-hours sell-off of more than 11% on Thursday after the company stunned Wall Street by announcing a nearly 60% jump in capital spending, pushing total planned investments for 2026 to $200 billion.

This figure was far higher than analyst expectations of around $147 billion, sparking concerns that soaring AI infrastructure costs could squeeze margins and free cash flows.

The reaction was swift and brutal. Despite reporting strong quarterly results, investors chose to focus on future cost pressures, triggering heavy selling in the FAANG heavyweight.

What Triggered the Massive Sell-Off?

1) Shock AI Capex Announcement

Amazon revealed that it will dramatically increase investments to build AI data centers, cloud infrastructure, and next-gen computing capacity.

This massive capex push is mainly driven by:

• Growing demand for generative AI

• Expansion of AWS AI computing

• Global cloud infrastructure race

Markets fear that profits could take a hit before meaningful returns appear.

2) Wall Street Dislikes Rising AI Costs

Investors are becoming increasingly nervous about the ballooning AI infrastructure bills across Big Tech.

With Microsoft, Google, Meta, and Amazon all racing aggressively in AI, the industry’s combined 2026 AI spending is projected to cross $630 billion.

This has raised a critical question:

Will AI investments generate returns fast enough to justify the cost?

For Amazon, that concern was amplified by the sheer scale of its spending plan.

Strong Earnings Couldn’t Save the Stock

Ironically, the sell-off came despite impressive quarterly performance:

Amazon Q4 Performance Snapshot

• Revenue: $213.4 billion (+14% YoY)

• Net Profit: $21.2 billion

• EPS: $1.95

• AWS Growth: 24%—the fastest in 13 quarters

Yet, markets largely ignored the strong earnings, focusing instead on future margin risk.

AWS vs Rivals: The Competitive Pressure

AWS remains Amazon’s most profitable engine, contributing:

• Only 15–20% of total revenue

• But over 60% of operating profit

Cloud Growth Comparison (Q4)

This gap is forcing Amazon to invest heavily just to stay competitive, intensifying the capital burden.

What CEO Andy Jassy Said

CEO Andy Jassy defended the spending spree, stating that AI demand is exploding and Amazon is monetising capacity as fast as it installs it.

He highlighted:

“Every customer experience will be reinvented using AI.”

However, Wall Street remained unconvinced, worried about short-term profitability and rising execution risk.

Guidance Adds to Investor Nervousness

Amazon also issued weaker-than-expected guidance:

• Q1 Operating Income Forecast: $16.5–$21.5 billion

• Street Estimate: $22.04 billion

This further added pressure on the stock, reinforcing fears of margin compression.

Why It Matters Today (Market Impact)

Amazon’s sharp fall is not just about one stock.

It signals a major shift in global market sentiment:

• AI enthusiasm is giving way to profit discipline

• Investors now demand clear financial returns

• Big Tech valuations face new pressure

Key Market Implications:

• FAANG stocks may see higher volatility

• AI-linked stocks could face profit booking

• Market focus shifts from growth stories to earnings quality

This could shape global tech market trends for the next several quarters.

Deeper Insight: Is AI Spending Becoming a Red Flag?

Until recently, aggressive AI investment was rewarded by markets.

Now, sentiment is changing:

• Rising interest rates

• Slowing global growth

• Pressure on corporate margins

Together, these make unchecked spending riskier than ever.

Amazon’s fall may mark the beginning of a broader re-rating of AI-heavy stocks.

What Happens Next?

Markets will closely watch:

• AWS growth trajectory

• AI monetisation speed

• Operating margin stability

• Cash flow generation

If Amazon can convert AI investments into sustained profits, sentiment could reverse. Otherwise, further downside risk remains.

Final Take

Amazon’s 11% after-hours crash reflects growing investor anxiety over the true cost of the AI boom. Despite strong business momentum, markets are now demanding financial discipline, not just futuristic ambition.

Frequently Asked Questions

Q1. Why did Amazon shares crash 11% after hours?

Amazon stock plunged after the company announced a nearly 60% surge in capital spending to $200 billion, far above market expectations. Investors fear that massive AI investments could pressure profit margins and cash flows in the short term.

Q2. Was Amazon’s earnings performance weak?

No. Amazon reported strong Q4 earnings, with revenue growth of 14% year-on-year, rising profits, and 24% AWS growth. However, markets focused more on future cost pressures than past performance.

Q3. Why is Amazon spending so heavily on AI?

Amazon is investing aggressively to expand AI data centers, cloud computing capacity, and generative AI infrastructure, mainly through AWS, to stay competitive against Microsoft, Google, and Meta.

Q4. Will this impact other FAANG stocks?

Yes. Amazon’s sell-off may increase volatility across FAANG and Big Tech stocks, as investors reassess whether massive AI investments will generate sustainable profits.

Q5. Does Amazon’s stock crash affect Indian markets?

Indirectly, yes. Weakness in US tech stocks can impact global risk sentiment, which may influence Nifty IT stocks, Indian IT majors, and global tech mutual funds.

Q6. Is Amazon’s long-term growth story still intact?

Yes. Amazon’s e-commerce leadership, AWS dominance, and AI positioning remain strong, but short-term volatility may persist until investors gain confidence in AI monetisation and margin stability.

Q7. Should investors worry about Big Tech’s AI spending boom?

Markets are now questioning whether trillion-dollar AI investments will deliver returns fast enough. This could reshape tech stock valuations and investment strategies globally.