Amazon shares fell 8% on Friday, February 6, 2026, following the company's fourth-quarter earnings report that revealed plans to spend $200 billion on AI infrastructure in 2026—a figure that shocked Wall Street and raised serious questions about near-term profitability despite strong operational performance.
The market reaction was swift and severe. Despite reporting solid Q4 results with revenue reaching $213.4 billion and AWS cloud revenue growing 24% year-over-year to $35.6 billion—marking the division's fastest growth in 13 quarters—investors fixated on the staggering capital expenditure guidance that exceeded analyst expectations by approximately $50 billion.
Amazon CEO Andy Jassy defended the spending blitz during the earnings call, stating the company sees "very high demand" for AI compute and is "monetizing capacity as fast as we can install it." The $200 billion will predominantly fund AWS data centers, custom AI chips including Trainium and Inferentia processors, and related infrastructure like power capacity and networking equipment.
However, the spending plan triggers a fundamental shift in Amazon's financial profile. Analysts at Morgan Stanley project Amazon will generate negative free cash flow of nearly $17 billion in 2026, while Bank of America estimates a deficit reaching $28 billion. This represents a dramatic reversal from the company's historical cash generation, with Amazon even filing an SEC notice Friday indicating it may need to raise equity and debt to fund the buildout.
The announcement arrives amid a broader Big Tech infrastructure arms race. Combined with Google parent Alphabet's $175-185 billion guidance, Meta's $115-135 billion forecast, and Microsoft's planned increases, the four hyperscalers now project approximately $650-700 billion in combined 2026 capital expenditures—a 60% surge from 2025 levels that far exceeds the annual investment of the entire U.S. energy sector.
Wall Street's concern centers on return timing and margin compression. While AWS demonstrated strong revenue acceleration, it still trails competitors Google Cloud (48% growth) and Microsoft Azure (39% growth) on a percentage basis, though from smaller revenue bases. At least five brokerages reduced their Amazon price targets following the results, reflecting diminished confidence in near-term financial performance.
Amazon's stock decline contributed to broader tech sector weakness, with software companies particularly vulnerable as investors worry that massive AI infrastructure spending could squeeze profits while autonomous AI agents threaten traditional software business models. The stock closed Friday at $205.21 in after-hours trading, down from $222.69, bringing year-to-date losses to approximately 9%.
The strategic gamble reflects Amazon's view that AI represents a generational infrastructure opportunity requiring immediate, aggressive investment to maintain competitive positioning. Jassy emphasized the spending represents disciplined capital allocation toward proven demand rather than speculative expansion, noting "this isn't some sort of quixotic, top-line grab."
For Amazon shareholders, the critical question becomes whether the company can maintain AWS operating margins while absorbing depreciation from $200 billion in new assets. Management's goal of shifting 40% of AI inference workloads to proprietary Inferentia chips by year-end could significantly improve profitability, but execution risk remains high.
The market's negative reaction signals investor preference for demonstrated returns over infrastructure promises, even from companies with Amazon's execution track record. As Big Tech collectively commits unprecedented capital to AI buildouts, patience for delayed returns appears increasingly limited.
