Amazon's Capital Expenditure Surge Raises Market Concerns
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2d ago
0mins
Should l Buy AMZN?
Source: Newsfilter
- Amazon Spending Forecast: Amazon forecasts a more than 50% increase in capital expenditures this year, leading to a 7.8% drop in premarket trading, reflecting market concerns about its AI investments potentially impacting future profitability.
- Tech Stock Decline: Following a selloff in tech stocks, the Nasdaq closed at its lowest level in over two months, indicating investor impatience with high capital expenditures, which could lead to broader market turbulence.
- Shift in Investor Sentiment: As money flows into defensive assets like consumer staples and telecoms, the AI trade faces significant pressure, suggesting a weakening confidence in risk assets, especially with Bitcoin down 50% from its peak in October.
- Small-Cap Recovery: Despite overall market pressures, the S&P 600 small-cap index and S&P 400 mid-cap index are both on track for about 1% gains this week, indicating that some investors are still seeking opportunities, potentially signaling a divergence in market trends.
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Analyst Views on AMZN
Wall Street analysts forecast AMZN stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for AMZN is 294.69 USD with a low forecast of 250.00 USD and a high forecast of 340.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
47 Analyst Rating
46 Buy
1 Hold
0 Sell
Strong Buy
Current: 222.690
Low
250.00
Averages
294.69
High
340.00
Current: 222.690
Low
250.00
Averages
294.69
High
340.00
About AMZN
Amazon.com, Inc. provides a range of products and services to customers. The products offered through its stores include merchandise and content it has purchased for resale and products offered by third-party sellers. The Company’s segments include North America, International and Amazon Web Services (AWS). It serves consumers through its online and physical stores and focuses on selection, price, and convenience. Customers access its offerings through its websites, mobile apps, Alexa, devices, streaming, and physically visiting its stores. It also manufactures and sells electronic devices, including Kindle, Fire tablet, Fire TV, Echo, Ring, Blink, and eero, and develops and produces media content. It serves developers and enterprises of all sizes, including start-ups, government agencies, and academic institutions, through AWS, which offers a set of on-demand technology services, including compute, storage, database, analytics, and machine learning, and other services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Market Reaction: The stock price of Amazon plummeted 12% over the past week due to worries about future spending, reflecting a cautious investor sentiment despite robust demand in AI and cloud computing sectors.
- Investor Confidence Shaken: Although Amazon enjoys strong demand across various sectors, the aggressive expansion plans have unsettled investors, leading to a decline in market confidence that could impact short-term stock performance.
See More
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- Inventory Management Strategy: Jassy noted that Amazon and many third-party sellers proactively purchased inventory last year to mitigate tariff impacts, which helped keep prices stable for a time, but as supplies dwindle, tariff costs are starting to reflect in prices.
- Changing Consumer Behavior: Consumers are showing increased caution in their shopping habits, opting for bargains and hesitating on higher-priced discretionary items, indicating the economic environment's influence on spending behavior.
- Limited Retail Profit Margins: Jassy emphasized that the mid-single-digit operating margins in retail leave little room to absorb rising costs, stating that if costs rise by 10%, retailers have very few options to manage that pressure.
See More
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- Earnings Performance: Amazon reported Q4 earnings per share (EPS) of $1.95, slightly below the $1.97 expected by analysts, while its revenue of $213.4 billion exceeded the $211.3 billion forecast, indicating strong revenue performance despite the earnings miss.
- Capital Expenditure Forecast: Amazon's projected capital expenditures for 2026 are set at $200 billion, a significant increase from $132 billion in 2025; although this raised market concerns, CEO Andy Jassy emphasized that most of the spending will address high demand for AWS services.
- AWS Growth Momentum: AWS experienced a 24% year-over-year revenue increase in Q4, reaching an annualized revenue run rate of $142 billion, with a backlog of $244 billion, reflecting robust growth in the cloud services market and a 40% increase in backlog year-over-year.
- Advertising Revenue Surge: Amazon's advertising revenue rose 22% year-over-year to $21.3 billion in Q4, with significant contributions from sponsored product ads and Prime Video ads, further solidifying its competitive edge in the e-commerce sector.
See More
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- Strategic Partnership Expansion: STMicroelectronics has announced a multi-year, multi-billion-dollar commercial agreement with Amazon Web Services (AWS) to support the development of next-generation high-performance compute infrastructure, thereby enhancing capabilities for cloud and AI data centers.
- Warrant Issuance: Under the agreement, STM issued warrants to AWS for the acquisition of up to 24.8 million ordinary shares, which will vest in tranches tied to payments for STM products and services, positioning STM as a key player in the semiconductor supply chain.
- Comprehensive Technology Solutions: The collaboration encompasses a wide range of semiconductor solutions from STMicroelectronics, including high-bandwidth connectivity, advanced microcontrollers, and analog and power ICs, aimed at addressing the increasing demands for compute performance and efficiency in hyperscale data centers.
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See More
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- Mass Production Readiness: Samsung plans to begin shipping HBM4 chips to Nvidia as early as the third week of February, marking its readiness for mass production in AI infrastructure, which will support Nvidia's upcoming Vera Rubin AI accelerators and narrow the gap with SK Hynix.
- Investor Optimism: With data center spending projected to reach $650 billion, investor sentiment around AI-linked U.S. tech stocks has surged, as evidenced by Nvidia's nearly 8% stock price increase on Friday, reflecting strong market confidence in AI technologies.
See More
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- Japanese Market Surge: The Nikkei 225 index broke the 57,000-point barrier for the first time, driven by Prime Minister Sanae Takaichi's landslide election victory and a high-profile endorsement from Trump, indicating a robust recovery in Japan that may attract more international investors.
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