Amazon to spend $200b on AI this year

Amazon plans to increase its capital expenditure to US$200 billion in 2026, a rise of over 50% from US$131 billion in 2025, primarily to fund AI infrastructure.

The company’s shares fell 11.5% after the announcement, amid concerns about the high costs associated with AI investments.

Amazon’s CEO Andy Jassy highlighted the company’s cloud revenue growth, with AWS generating US$35.6 billion in the December quarter, compared to Google Cloud’s US$17.8 billion and Microsoft Azure’s 39% growth.

Industry analysts noted that Amazon’s projected spending exceeds its operating cash flow, reflecting ongoing heavy investment in AI and cloud services.

Amazon’s cloud division accounts for over 60% of operating profit, despite representing only 15 to 20% of total sales.

🔗 Source: Reuters

🧠 Food for thought

Implications, context, and why it matters.

Amazon’s spending is a calculated bet on custom chips and selective cuts

Amazon plans US$200 billion in capital expenditure for 2026. Its expected 2025 spending of about US$100 billion tops Microsoft at US$80 billion, Alphabet at US$75 billion, and Meta at US$65 billion 1.
CEO Andy Jassy ties the plan to AWS’s early investment playbook. He says it should deliver strong returns 2.
Cost control runs through in-house silicon (semiconductor chips designed by Amazon). Custom Trainium and Graviton chips now total an annual revenue run rate above US$10 billion 2.
Amazon took a US$610 million asset impairment tied to a reset in physical grocery. It said it will close all Amazon Fresh and Amazon Go locations, which total 72 stores nationwide, convert some sites into Whole Foods Market, and open more than 100 new Whole Foods locations over the next few years 3.

The AI arms race is turning into a full-stack infrastructure fight

The capital push links AI progress to ownership of the stack, from custom chips to data centers.
That spending bar makes it harder for smaller cloud providers to keep up. It could pull more market share toward hyperscalers (the biggest cloud computing companies that operate global data centers) such as Amazon, Microsoft, and Google 1.
Amazon keeps turning internal tools into products. After it said it would close Go stores, it continued licensing “Just Walk Out” technology (automated checkout that uses sensors and computer vision so shoppers can leave without scanning items) to third parties such as sports venues 3.