Amazon.com Inc. may be a leader in the artificial intelligence race, but investors are increasingly unwilling to pay up for the cost of maintaining that position.
Shares of the e-commerce and cloud computing giant plunged 12% in February, their worst month since December 2022, as Wall Street takes an increasingly jaundiced view of the company’s aggressive AI spending plans. Not only are the capital expenditures eating into Amazon’s free cash flow, but market pros are growing impatient about when they’ll pay off in dramatic fashion.
The stock was also the worst performer of the so-called Magnificent Seven technology behemoths last month and among the 40 weakest companies in the S&P 500. And that’s coming off a tepid 5.2% gain in 2025, which was the weakest return in the Mag Seven as well.
“Amazon is starting to look like a cautionary tale, because its investments are so high but the returns are among the lowest in Big Tech,” said Adam Rich, who helps oversee more than $15 billion in assets as deputy chief investment officer and portfolio manager at Vaughan Nelson Investment Management. “The growth we’re seeing just isn’t enough to justify the higher capex.”
Amazon was down around 2% on Monday as part of a broader selloff in equity markets following military strikes across the Middle East.
The cash spigot opened again on Friday, as Amazon said it would invest $50 billion in OpenAI. As part of the circular nature of the deal, OpenAI also will spend an additional $100 billion over eight years under its current agreement with Amazon Web Services.
Much of the recent weakness comes on the heels of Amazon’s earnings report from early February that included plans to spend $200 billion this year on data centers, chips and other equipment to expand its computing capacity. The target was far more than expected and contributed to a disappointing forecast for operating income, which completely overshadowed the fastest quarterly growth for Amazon Web Services in more than three years.
As a result of the spending, Amazon’s free cash flow is expected to be negative $524.2 million in 2026, its first year of negative cash flow since 2022, according to data compiled by Bloomberg. It reported $7.7 billion in free cash flow in 2025.
Amazon is not the only mega-cap tech company to have its spending come under scrutiny. Microsoft Corp. similarly tumbled after revealing a jump in capex. CoreWeave Inc. plunged 19% on Friday, its biggest drop since August, after reporting a higher-than-expected capex target and a wider-than-expected loss.
Of course, the selloff has made Amazon shares look relatively cheap at under 22 times estimated earnings, less than half its average of 50 over the past 20 years. The stock trades near its biggest discount to the tech-heavy Nasdaq 100 Index on record. It’s also far cheaper than Walmart Inc., which has a multiple above 43, even as Amazon recently dethroned the retail giant as the biggest global company by revenue.
The focus on AI spending as a risk for Big Tech represents a shift in sentiment by investors who not too long ago considered throwing money after the emerging technology as a bullish signal. The transformation coincides with the impact of rising capex showing up in corporate financials. Amazon’s return on invested capital, or ROIC, was 12.4% in the fourth quarter, down from 14.8% two quarters prior, which had been its highest ROIC since 2011.
“Based on the multiple it looks oversold, but I see ROIC trending lower for the medium term, and so long as the ROIC is falling, the market is not going to reward that,” said Rich, whose firm owns Amazon shares. “I’m trying to balance those two thoughts.”
To be sure, many Wall Street pros still see the company’s spending leading to future growth. Friday’s OpenAI deal “puts last quarter’s $200 billion capex announcement into context, as AWS rapidly expands to support this big new customer,” William Blair analyst Dylan Carden wrote in a note to clients on Friday.
Beyond AWS, Amazon bulls have a number of reasons to believe the company’s AI position remains strong. The OpenAI deal includes usage of the company’s Trainium chips, providing validation for that business. Amazon is also a long-time investor in Anthropic, the AI startup that has been making waves across the market. And Amazon’s aggressive use of robotics is expected to improve efficiency in its vast network of warehouses and logistics.
These dynamics are why Amazon remains a consensus favorite on Wall Street despite its stock’s recent underperformance. Of the 83 analysts covering the company, 78 have buy ratings, five have holds and none recommend selling, according to data compiled by Bloomberg. The 12-month price target of $282.65 represents a roughly 35% gain from where the shares closed Friday.
Amazon is “probably the most compelling stock opportunity among the Magnificent Seven,” said Andrew Choi, portfolio manager at Parnassus Investments, which oversees $43 billion.
“It’s growing quickly, it has a low multiple, and yes it is going through an investment cycle, but if it turns out to have invested too much, it can just dial it back and we’ll see cash flow rebound,” he said. “No matter how you slice and dice it, it just screens attractive.”
Vlastelica writes for Bloomberg.
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