Sudden negative news! Tech giants, plummeting!

The U.S. stock earnings season is fraught with danger.

After the earnings reports were released, the stock price of tech giant Amazon plummeted significantly, dropping over 11% in after-hours trading. Some analysts pointed out that due to an unexpected surge in capital expenditure guidance to $200 billion in 2026, Amazon’s earnings guidance fell short of expectations, causing investors to question whether such high investments can yield the expected substantial returns in the future.

Wall Street institutions have warned that the current scale of AI (artificial intelligence) infrastructure construction is unprecedented, and the market is currently unable to reasonably price related stocks. Recently, investor concerns about the AI sector are intensifying.

Free Cash Flow Takes a Big Hit

On February 5th, Eastern Time, after the market closed, Amazon’s stock price fell sharply, once dropping over 11%. As of the time of writing, the decline remains at 11.26%.

Amazon’s latest financial report shows that in Q4 2025, net sales increased by 14% year-over-year to $213.39 billion, beating analyst expectations of $211.49 billion; Q4 EPS (earnings per share) was $1.95, up 4.8% year-over-year, slightly below the consensus estimate of $1.96, with growth slowing significantly from 36.4% in Q3.

However, the profitability expansion of AWS has slowed somewhat. The report indicates that in Q4 2025, AWS contributed an operating profit of $12.47 billion, up 17.3% year-over-year, with an operating margin of 35.0%, down from 36.9% in the same period last year.

Regarding the highly watched capital expenditure, Amazon expects that in 2026, capital spending will reach $200 billion, a substantial 50% increase from 2025, and about 36.9% higher than the consensus estimate on Wall Street.

In comparison, Amazon’s guidance for 2026 exceeds Google’s previous midpoint expenditure estimate of approximately $180 billion by 11%, far surpassing Meta’s planned maximum expenditure of $135 billion this year. Meanwhile, Microsoft’s full-year capital expenditure for the fiscal year ending June 2026 is expected to be less than $100 billion.

Notably, while burning cash aggressively, Amazon’s cash flow has already shown warning signs.

The financial report shows that by the end of Q4 2025, over the past 12 months, Amazon’s operating cash flow was $139.5 billion, up 20% year-over-year, but free cash flow was only $11.2 billion, a sharp 70.7% decrease from $38.2 billion in the same period last year.

The weakening of free cash flow is directly due to the surge in capital expenditure: over the past 12 months, Amazon’s spending on property and equipment after disposals and incentives reached $128.3 billion, a 65% increase year-over-year.

According to the cash flow statement, in 2025, “purchases of property and equipment” totaled $131.8 billion, a nearly 59% increase from $83 billion last year. The company explicitly states that this mainly reflects AI-related investments.

Analysts point out that market concerns about Amazon’s $200 billion capital expenditure mainly include: ongoing pressure on free cash flow possibly continuing or worsening; short-term profit margins being sacrificed for computing power and infrastructure expansion; and if AI monetization falls short of expectations, valuation pressures will increase.

Risks of the AI “Money Burning War”

Dave Wagner, portfolio manager at Aptus Capital Advisors, said about Amazon’s performance: “We initially expected to see strong profit growth with continuity, but that hasn’t been the case. The market doesn’t like continuous large capital expenditures to achieve such growth rates.”

Regarding the future returns of massive capital spending, Amazon CEO Andy Jassy stated in a release: “Given the strong demand for our existing products and services, as well as groundbreaking opportunities in AI, chips, robotics, and near-Earth orbit satellites, we expect Amazon to invest about $200 billion in capital expenditures in 2026, and we anticipate long-term investment returns to be very substantial.”

Amazon’s management also emphasized progress in self-developed chips and AI platforms, such as Trainium and Graviton, which together generate over $10 billion annually, with triple-digit year-over-year growth; the demand for Trainium 2 and 3 remains high, and the Bedrock model ecosystem is expanding. This reinforces Amazon’s positioning as an “AI infrastructure provider.”

From the latest financial disclosures, major U.S. tech companies are unlikely to slow down their massive AI investments in the short term. Amazon, Microsoft, Alphabet, and Meta are expected to spend over $630 billion this year.

Scott Welch, Chief Investment Officer at Certuity, said that since late 2025, the market has begun to differentiate winners and losers in the AI sector. This trend continues, with funds shifting from high-valuation tech stocks to previously overlooked undervalued sectors.

Jedd Ellbrook, portfolio manager at Argent Capital, believes that the scale of AI infrastructure construction is unprecedented, but the market is currently unable to reasonably price related stocks. Recently, concerns about the AI sector are rising.