:max_bytes(150000):strip_icc()/GettyImages-2249060295-d8b3f943198e4954889fb28c0247d8db.jpg "Amazon Is the Dow’s Weakest Performer Friday as Stock Sinks Over 5%. Here’s Why")
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Key Takeaways
- Amazon shares slumped Friday after the tech giant fell short of profit estimates and outlined bigger-than-expected spending plans.
- Several Wall Street analysts lowered their price targets for Amazon stock after the results, citing concerns about the company’s spending.
Amazon said it plans to invest heavily in its AI buildout this year, and investors aren’t pleased.
Shares of the world’s largest cloud provider dropped over 5% to post the weakest performance in the Dow Jones Industrial Average Friday, on a day when the index rose to a record high.
The tech giant reported profits yesterday that missed expectations and said it could spend up to $200 billion this year on capital expenditures, far more than many Wall Street analysts anticipated. Executives said most of that spending is set to go toward the company’s cloud business, as it invests in data centers and equipment to expand its AI capacity.
Why This Matters to Investors
Amazon is the latest Magnificent Seven member to lay out big spending plans, and see its stock tumble afterward. Shares of Microsoft and Google parent Alphabet also took a hit recently after the companies announced massive investments in AI, amid growing concerns over whether the companies will see enough of a return to justify the spend.
Though analysts from Oppenheimer, HSBC, Wedbush, JPMorgan, Citi, Morgan Stanley, and Bank of America maintained bullish ratings for the stock, they all trimmed their price targets following the report, amid worries about how Amazon’s spending could affect its finances.
Analysts from Wedbush said many investors “will likely need to see more tangible returns” before giving their support. Still, Morgan Stanley analysts said they believe Amazon could be “the most under-appreciated GenAI winner in our group” at its current valuation.
JPMorgan analysts said they expect Amazon executives are “willing to take some near-term profit pain to drive significant long-term growth opportunities,” which Amazon did when first building its cloud business Amazon Web Services.
Friday’s drop leaves Amazon shares down roughly 9% since the start of the year.
UPDATE: This article has been updated since it was first published to reflect more recent prices.
