According to Reuters, shares of Amazon fell nearly 9 percent on Friday after the company announced plans to invest about $200 billion in capital spending this year, raising fresh concerns among investors over the rising cost of artificial intelligence development, according to Reuters.
The sharp decline came after Amazon joined other major U.S. technology companies in forecasting significantly higher expenditures for 2026. Collectively, Big Tech firms are expected to spend more than $630 billion on data centers, AI infrastructure, and advanced chips, marking an unprecedented level of investment in the sector.
While investors had anticipated increased spending as companies focus on AI-driven growth, analysts said the scale of the planned outlays exceeded market expectations and raised doubts about whether profits would grow fast enough to justify the costs.
Analysts at MoffettNathanson said that although rising capital spending was expected, the magnitude of Amazon’s projected 50 percent increase was far greater than consensus forecasts. They warned that the growing capital intensity could pressure margins and limit flexibility.
The surge in investment has also revived comparisons with the dot-com boom of the early 2000s, when massive infrastructure spending helped build the internet but generated limited returns for many companies.
Amazon’s outlook has added to broader market volatility linked to AI expectations. Shares of Microsoft and Alphabet, Amazon’s main cloud rivals, also declined after their recent earnings reports. At the same time, new technologies from AI startups have triggered a sell-off in software stocks and intensified concerns about long-term industry disruption.
The S&P 500 software and services index has lost nearly $1 trillion in market value since late January, reflecting growing investor unease over the sustainability of AI-driven growth.
Russ Mould, investment director at AJ Bell, said the market is shifting away from stocks where expectations are high and positive surprises are becoming harder to achieve. He added that large cloud companies are moving from relatively asset-light models to more capital-intensive structures, with spending rising faster than revenues.
If Friday’s losses persist, Amazon could lose around $200 billion in market value. The company currently trades at a price-to-earnings ratio of about 27, compared with around 22 for Microsoft and 28 for Alphabet.
Despite investor concerns, technology executives remain confident about their AI investments. Company leaders argue that long-term returns will outweigh the short-term costs of competing in the rapidly evolving sector.
Amazon Chief Executive Andy Jassy defended the company’s strategy during an earnings call, pointing to continued growth at Amazon Web Services. AWS reported revenue growth of 24 percent, slower than Google Cloud’s 48 percent and Microsoft’s Azure at 39 percent, but Jassy said the comparison was misleading.
He told analysts that AWS is a much larger business than its competitors and that maintaining high growth on such a large base is more challenging.
Some analysts supported this view but cautioned that the massive spending leaves little room for missteps. MoffettNathanson said that while strong demand signals likely justify the investment, the margin for error is narrowing as competition intensifies.
According to Reuters, the growing scale of AI-related spending by major technology firms is becoming a key factor shaping investor sentiment and market performance in 2026.