Amazon Chief Executive Andy Jassy stated that AI represents “the biggest technology shift and opportunity in business since the internet.” However, capacity constraints could make AI growth “lumpy,” he told analysts. Despite reporting fourth quarter earnings and sales ahead of expectations, Amazon stock slipped after the tech giant provided a weaker-than-expected first quarter outlook.
Jassy informed investors that Amazon plans to spend about $100 billion on capital expenditures this year, with the “vast majority” going towards AI for its Amazon Web Services (AWS) cloud business. He emphasized that the company won’t spend unless it sees “significant signals of demand.” The AWS sales growth came in slightly below expectations, with Jefferies analyst Brent Thill noting that “AWS sales showed no acceleration — echoing results of Microsoft and Google clouds.”
Capacity constraints, including building data centers, procuring high-performing chips, and securing electricity, are contributing to the “lumpy” growth. Jassy pushed back against concerns that lower-cost AI solutions like those from Chinese startup DeepSeek would reduce overall cloud demand. Amazon began offering enterprises access to DeepSeek through AWS recently.
Analysts remain bullish on Amazon, with RBC Capital Markets analyst Brad Erickson reiterating an outperform rating and raising his Amazon stock price target. William Blair analysts also maintained an outperform call, citing Amazon’s “strong AI positioning” and potential for easing capacity constraints later in the year.
Analyst Perspectives
- RBC Capital Markets analyst Brad Erickson: “The combo of AWS’s high margin growth and further network cost efficiencies have the company poised to continue growing earnings…”
- William Blair analysts: “Lower cost of inferencing… is very likely to proliferate AI applications, which is once again a positive for AWS”
Amazon’s significant investment in AI infrastructure positions the company well for future growth despite current capacity challenges.
