Amazon's CEO, Andy Jassy, is defending the company's plan to invest $200 billion in capital expenditures for 2026, despite investor concerns. The announcement, made alongside the fourth-quarter earnings report, rattled the market, causing Amazon's stock to dip by as much as 10% in extended trading. Analysts had expected a rise to roughly $147 billion, according to FactSet.
Jassy addressed investor apprehension by emphasizing that the investment is a strategic move, not an impractical pursuit of growth. He cited "strong demand for our existing offerings and seminal opportunities like AI, chips, robotics, and low Earth orbit satellites" as justification for the increased spending. He also assured investors that Amazon is "monetizing capacity as fast as we can install it".
The bulk of the $200 billion investment will be directed towards Amazon Web Services (AWS). Jassy stated that customers are increasingly seeking AWS for core and AI workloads. A significant portion of the funding will go towards data centers, servers, and networking equipment, which are essential for training and deploying sophisticated AI models. Amazon's chips business, including Graviton and Trainium processors, is reportedly generating over $10 billion in annual revenue and experiencing triple-digit percentage growth year-over-year. Jassy has said that the company's Trainium 2 chip is 40% more price performant than other leading GPUs. The company has already released a third version of Trainium that it says is 40% more price performant than Trainium 2.
Jassy also compared the AI investment cycle to the early stages of Amazon's core cloud business and said, "this isn't some sort of quixotic top-line grab". He characterized the current moment as an "extraordinarily unusual opportunity to forever change the size of AWS and Amazon as a whole". Jassy believes the biggest demand for AI will come from core enterprise production workloads.
Amazon's Q4 earnings for 2025 showed revenue rising 14% to $213.39 billion, surpassing the $211.33 billion forecast. Operating income also increased to $25 billion, up from $21.2 billion in the year-ago period. AWS revenue grew 24% to $35.6 billion, marking its fastest growth in over three years.
Amazon's ambitious investment plan reflects a broader trend among tech giants. Alphabet (Google's parent company) is expected to spend between $175 billion and $185 billion, while Meta Platforms anticipates spending between $115 billion and $135 billion. In total, Amazon, Microsoft, Google, and Meta are projected to collectively invest over $630 billion this year. This surge in spending underscores the intense competition in the AI sector and the race to dominate the next wave of technological innovation.
