Amazon (AMZN) Stock Tumbles: Why Wall Street Is Worried About $200 Billion Bet

TLDR

• Amazon stock fell around 9% after announcing a massive $200 billion capital expenditure plan for 2026, well above the $150 billion Wall Street expected.
• The company missed Q4 earnings per share at $1.95 versus $1.96 expected, but beat revenue forecasts with $213.4 billion, up 13.6% year-over-year.
• AWS revenue growth accelerated to 24%, beating the 22% analyst estimate, with a backlog expanding roughly 40% faster than revenue.
• Bank of America lowered its price target from $286 to $275 but maintained a Buy rating, citing margin volatility from the capacity ramp but strong long-term potential.
• Most of the $200 billion capex will go toward AWS infrastructure and AI chips, with major customers like Anthropic and OpenAI still unprofitable, raising concerns about capacity utilization.

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Amazon reported mixed fourth-quarter results on February 5 that sent shares tumbling nearly 9% the following day. The tech giant’s ambitious spending plans overshadowed solid revenue growth and cloud performance.

Amazon.com, Inc., AMZN

The company posted earnings per share of $1.95, missing the $1.96 analyst estimate. Revenue came in stronger at $213.4 billion, up 13.6% year-over-year and beating expectations by $2.17 billion.

AWS revenue growth accelerated to 24%, outpacing Wall Street’s 22% forecast. The cloud division continues to add capacity quickly, with backlog expanding roughly 40% faster than revenue growth.

Record-Breaking Capital Expenditure Raises Eyebrows

The real shock came from CEO Andy Jassy’s announcement of $200 billion in capital expenditure for 2026. That figure is up more than 50% from the nearly $130 billion spent in 2025.

Wall Street had expected around $150 billion. The announcement caught investors off guard.

Amazon ended 2025 with $90.1 billion in cash and cash equivalents. Net income for the full year hit $77.7 billion, up about 31%. The company also carries $68.8 billion in long-term debt.

Even with continued income growth, Amazon will need to raise additional debt to fund the $200 billion plan. Most of the spending will go toward AWS infrastructure and AI chip development.

The company projected weaker first-quarter margins than anticipated. Analysts expect the capacity ramp will create margin volatility in coming quarters.

Amazon also guided for Q1 revenue between $173.5 billion and $178.5 billion. The midpoint came in slightly above Wall Street forecasts.

AI Investment Strategy Draws Mixed Reactions

Bank of America analyst Justin Post lowered his price target from $286 to $275 but kept a Buy rating. He adjusted expectations due to margin uncertainty and sector multiple compression.

Post values AWS at 8x 2027 sales in his sum-of-the-parts analysis. His revised target still implies roughly 31% upside from current levels.

The analyst sees the heavy spending as necessary. Amazon faces strong competition in cloud services and AI infrastructure from Microsoft and Google.

Management views AI as an “unusual opportunity” that can drive demand as customers migrate data to the cloud. The company launched Project Rainier in October 2025, a massive AI compute cluster using 500,000 Trainium2 chips.

Anthropic trains its AI models on the cluster. Amazon’s $244 billion backlog likely includes substantial commitments from both Anthropic and OpenAI.

Neither company has achieved profitability yet. That creates risk if Amazon builds capacity those customers ultimately can’t afford.

Amazon shipped its new Trainium3 chips in December 2025, promising 40% better price performance than Trainium2. Jassy said nearly all Trainium3 supply will be committed by mid-2026, with Trainium4 already in development.

Scotiabank also cut its price target to $275 from $300 while maintaining a Sector Outperform rating. The firm cited weak EBIT results and poor international margins alongside the capex concerns.

Of the 43 analysts covering Amazon, 38 recommend buying the stock while 5 rate it a Hold. The consensus price target of $283.43 suggests about 35% potential upside over the next year.

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