Amazon Faces 12% Stock Drop After Unveiling $200 B AI Capex and OpenAI Deal
Amazon shares fell 12% in February after management outlined a $200 billion AI capex plan and a $50 billion OpenAI investment, with free cash flow forecast at negative $524.2 million in 2026. An AWS data-center fire in the UAE disrupted services and knocked premarket stock down 2.5%, highlighting infrastructure risks.
1. $200B AI Capex Plan and OpenAI Investment
Amazon management disclosed plans to invest $200 billion this year in data centers, chips and related infrastructure to expand computing capacity for AI, alongside a $50 billion strategic stake in OpenAI to anchor AWS as a key AI cloud provider.
2. Share Performance and Valuation Pressure
Shares plunged 12% in February, marking the worst monthly decline since December 2022 and the weakest performance among the Magnificent Seven, trading at under 22x estimated earnings—less than half its 20-year average multiple.
3. Cash Flow and Profitability Outlook
Forecasts show free cash flow turning negative $524.2 million in 2026, down from $7.7 billion in 2025, while return on invested capital eased to 12.4% in Q4 from 14.8% two quarters earlier, indicating near-term profit pressures.
4. UAE Data-Center Fire Disrupts AWS Services
A fire at an AWS facility in the UAE forced shutdown of two data-center clusters, knocking key services offline across the Middle East, prompting reroutes and driving a 2.5% premarket stock decline as infrastructure vulnerabilities were exposed.