AI Spending to Top $700B as Amazon Shares Slip 11% Since May
AMZN•Since mid-May, leading Big Tech names have slumped over 13% while the S&P 500 dipped only 2%, with Amazon shares 11% below their 52-week high. Rising AI capital expenditures, forecast to surge 70% to more than $700 billion this year, have weighed on free cash flow and investor confidence.
1. Recent Share Decline
Since peaking in mid-May, Amazon stock has fallen 11% compared to a 2% drop in the S&P 500, reflecting broader pressure on the Magnificent Seven cohort that has shed over 13% in market value.
2. Rapid AI Infrastructure Spending
Amazon’s artificial intelligence capex is set to balloon roughly 70% this year to exceed $700 billion, driving massive data center and GPU investments that are outpacing revenue growth.
3. Impact on Cash Flow and Balance Sheet
Heavy infrastructure outlays have pushed Amazon’s capital expenditures nearly equal to its free cash flow, prompting debt and equity issuance as the company stretches its financial runway.
4. Outlook Ahead of Q2 Results
Investors are bracing for July’s Q2 earnings to demonstrate returns on these AI investments, while concerns over potential Fed rate hikes add pressure to financing costs and near-term valuation.
