Amazon shares slide as $200 billion outlay fans fears over AI returns

Core Viewpoint - Amazon's shares dropped 9% following the announcement of a planned $200 billion capital expenditure for the year, raising investor concerns about the scale of spending on artificial intelligence by Big Tech [1]. Group 1: Capital Expenditure - Amazon forecasts a 50% increase in capital outlay, contributing to a total of over $630 billion in planned spending by U.S. tech giants on datacenters and AI chips [2]. - The magnitude of Amazon's spending has surprised analysts, leading to questions about whether returns can keep pace with such high capital intensity [2]. Group 2: Market Comparisons - The surge in spending has drawn parallels to the dot-com era, which, while building the modern internet, resulted in modest returns for many companies that financed the infrastructure [3]. - The broader market has experienced volatility, with significant declines in shares of Microsoft and Alphabet, Amazon's main cloud competitors, following their earnings reports [4]. Group 3: Investment Sentiment - Investment director Russ Mould noted that the declines in stock prices reflect a shift away from companies where achieving positive surprises may be challenging, as capital expenditure growth is outpacing sales growth [5]. - Amazon's market value could decrease by around $200 billion if current losses persist, with a price-to-earnings ratio of 27.01, compared to Microsoft's 21.62 and Alphabet's 28.36 [6]. Group 4: Executive Confidence - Despite market concerns, Big Tech CEOs remain confident that returns from AI investments will outweigh the costs associated with competing in a high-stakes environment [7]. - Amazon's CEO Andy Jassy defended the company's 24% revenue growth in Amazon Web Services, which is slower than the growth rates of Google Cloud and Microsoft Azure [7].