Amazon is having its worst week in over a year. The stock has dropped 16% over seven consecutive trading sessions — the longest losing streak since November 2022.
The culprit: a $200 billion capital expenditure plan for 2026.
The Numbers That Spooked Wall Street
Amazon's Q4 earnings on February 5 were solid. Revenue hit $213.4B (+14% YoY). AWS growth accelerated to 24% — the fastest in 13 quarters. Operating income reached $25B.
Then came the guidance.
2026 capex: ~$200 billion. That's up 52-56% from 2025's ~$130B. Far above analyst expectations of ~$150B. The highest among hyperscalers.
Most of it goes to AI infrastructure — data centers, custom chips (Trainium, Graviton), networking. CEO Andy Jassy says demand for AI compute is outpacing supply. The spend is about meeting that demand.
Investors heard something else: negative free cash flow in 2026. First among cloud peers.
The Seven-Day Rout
The stock dropped 9% the day after earnings. It kept falling. By February 12, AMZN had shed 16% from its February 2 close.
| Metric | Post-Earnings Change |
|---|---|
| Stock Price | -16% (7 days) |
| Free Cash Flow (TTM) | Down to $11.2B |
| Market Cap Lost | ~$300B |
This is classic growth-stock tension. Long-term infrastructure investment versus short-term cash flow. The market chose to panic.
The Bull Case: Ackman and Analysts
Not everyone is selling.
Bill Ackman's Pershing Square holds Amazon as ~13% of fund capital — initiated in April 2025 around $161/share. The thesis: AWS is the leading cloud provider. AI inference workloads will rapidly consume the new capacity. The planned doubling of data-center capacity through 2027 is a feature, not a bug.
Most analysts remain bullish:
| Firm | Rating | Price Target | View |
|---|---|---|---|
| UBS | Buy | $301 | AWS growth doubling in 2026 |
| JPMorgan | Overweight | $265 | "Shock value" overstated |
| BMO | Outperform | $310 | Investors "misunderstanding" the opportunity |
| Wedbush | Outperform | $300 | Capex positive long-term |
The consensus (~44 analysts): Strong Buy with ~$282-297 price target. That implies 30-40% upside from current levels.
The Bear Case
D.A. Davidson downgraded to Neutral with a $175 target. Their concern: capex rising faster than AWS revenue. If AI monetization takes longer than expected, returns suffer.
The free cash flow math is brutal. Amazon generated $11.2B in trailing FCF last year. This year's capex could push that negative. That's a first for a hyperscaler.
Some analysts point to execution risks: Project Kuiper (satellites), potential AI overcapacity, competition from Microsoft and Google ramping their own AI spend.
Historical Context
AWS has historically delivered strong returns — roughly $0.80 in revenue for every $1 of capex. If that holds, the $200B bet pays off.
But "if" is doing heavy lifting. The AI buildout is unprecedented in scale. No one knows exactly what returns will look like. Ackman is betting the demand is real. The market is betting it's overhyped.
What to Watch
- Q1 2026 results — Does AWS growth accelerate enough to justify the spend?
- Free cash flow trajectory — How negative, and for how long?
- AI monetization signals — Enterprise adoption rates, pricing power
- Competitor capex — Microsoft, Google, Meta all ramping. Who wins the AI infrastructure race?
The Bottom Line
Amazon is making the largest infrastructure bet in tech history. The stock is pricing in maximum uncertainty.
If AI demand materializes as projected, this is a generational buying opportunity. If it doesn't, it's an expensive lesson in overcapacity.
The next 12 months will tell us which.
AMZN