Amazon AWS Margins Squeeze from Record AI Capex, UBS Downgrades Sector
U.S. tech capital expenditures climbed to their highest levels since 2020 as Amazon Web Services accelerated AI infrastructure spending, compressing AWS free cash flow margins by an estimated 200 basis points year-over-year. UBS has downgraded the U.S. information technology sector, warning that elevated software licensing and hardware capex could further erode Amazon’s profitability.
1. AI Investment Spurs Capital Expenditure Surge
Amazon Web Services ramped up purchases of high-end AI accelerators and expanded data center capacity globally, driving U.S. tech capex to multi-year peaks and compressing AWS free cash flow margins by roughly 200 basis points year-over-year.
2. UBS Downgrades Sector over Software and Capex Risks
UBS lowered its rating on the U.S. information technology sector to neutral, citing unchecked software licensing fees and elevated hardware spending that could slow revenue growth and further pressure Amazon’s AWS profitability ahead of expected AI deployment costs.