Amazon shares tumble on $200bn AI spending plans
Amazon’s shares are tumbling in early trading, though, as investors balk at its plans for an artificial intelligence spending blitz.
Amazon’s shares have dropped by over 9%, a day after it announced plans to spend $200bn on artificial intelligence and robotics this year.
Amazon’s CEO Andy Jassy sounded bullish last night, declaring:
“With such strong demand for our existing offerings and seminal opportunities like AI, chips, robotics, and low earth orbit satellites, we expect to invest about $200 billion in capital expenditures across Amazon in 2026, and anticipate strong long-term return on invested capital.”
But as flagged earlier (9.59am), investors fear companies are wasting their money, given the hundreds of billions of dollars being committed to AI rollout this year.
Analysts at Saxo says Amazon’s spending plans equal “materially higher capital expenditure than markets had expected”, and are reigniting concerns around cash flow discipline.
Key events
Although stock markets are higher in the US and across Europe, investors “remain on edge”. flags Kathleen Brooks, research director at XTB:
After Thursday’s rout, another recovery is on the cards for markets today. We mentioned earlier that the mini recovery in Bitcoin was likely to boost overall sentiment, as the link between crypto and AI stocks and the tech sector remains strong. Bitcoin is now higher by $5000 on the day, although it remains below the $70,000 level, silver and gold are recovering, and the S&P 500 is higher by more than 1%, led by the tech sector.
There are still pockets of weakness, Amazon is lower by 9% on the back of its earnings report on Thursday night, and its massive capex pledge. Also, if the repricing of crypto is the key support for AI-linked stocks, then the foundations of the recovery remain weak.
US consumer sentiment rises as wealthier Americans feel cheerier
US consumer sentiment has improved this month, new data shows, driven by wealthier Americans who have benefited from stock market gains.
The University of Michigan’s consumer sentiment index, just released, has risen to 57.3 points this month, up from 56.4 in january, lifted by a more optimistic view of current economic conditions.
But it’s the rich what get the pleasure…. as Surveys of Consumers director Joanne Hsu explains:
Sentiment surged for consumers with the largest stock portfolios, while it stagnated and remained at dismal levels for consumers without stock holdings.
On net, modest increases in current personal finances and buying conditions for durables were offset by a small decline in long-run business conditions.
Today’s 9% tumble in Amazon’s share price has knocked almost $220bn off the company’s market capitalisation.
Equity markets are facing threats on two fronts, explains Raffi Boyadjian, Lead Market Analyst at Trading Point:
Fears that all the spending on AI will not generate substantially higher revenue to justify the bloated valuations, and more recently, the disruption that AI could cause in certain industries such as software and data services, are no longer being seen as remote risks.
Amazon is the latest to spark concerns about its capex plans after it yesterday announced that it wants to up its AI investment to $200 billion this year. The stronger-than-expected revenue growth it reported for Q4 was not enough to stave off a 10% plunge in its stock in after-hours trading.
Or indeed a 9% tumble when trading began….
Amazon shares tumble on $200bn AI spending plans
Amazon’s shares are tumbling in early trading, though, as investors balk at its plans for an artificial intelligence spending blitz.
Amazon’s shares have dropped by over 9%, a day after it announced plans to spend $200bn on artificial intelligence and robotics this year.
Amazon’s CEO Andy Jassy sounded bullish last night, declaring:
“With such strong demand for our existing offerings and seminal opportunities like AI, chips, robotics, and low earth orbit satellites, we expect to invest about $200 billion in capital expenditures across Amazon in 2026, and anticipate strong long-term return on invested capital.”
But as flagged earlier (9.59am), investors fear companies are wasting their money, given the hundreds of billions of dollars being committed to AI rollout this year.
Analysts at Saxo says Amazon’s spending plans equal “materially higher capital expenditure than markets had expected”, and are reigniting concerns around cash flow discipline.
Wall Street opens higher after volatile week
Ding Ding rings the opening bell on Wall Street, and stocks are moving up.
After a volatile week, the main indices are all higher in early trading.
The Dow Jones Industrial Average rose 307.20 points, or 0.62%, to 49,212.
The S&P 500 gained 32.23 points, or 0.50%, to 6,832.
The Nasdaq Composite is up 78.17 points, or 0.35%, to 22,618.
India’s IT sector has also been hurt by AI-driven losses; the NIFTY IT index has shed around 7% this week.
More than £7bn wiped off RELX this week
It’s been a far-from-relaxing week for RELX, the information and analytics company formerly known as Reed Elsevier.
RELX owns the LexisNexis data analysts company – just the sort of firm which might be disrupted by high-powered AI agents.
RELX’s shares are down 4,4% today, and have dropped by around 16.5% this week – mainly during their Tuesday plunge, when fears about artificial intelligence startup Anthropic’s new plug-in tools for companies hit markets.
That’s wiped around £7.6bn off RELX’s market capitalisation, I calculate.
We’re hearing a lot about ‘moats’ at the moment, as analysts try to work out which companies might be protected from the march of AI.
Niall Gallagher, European equities investment manager at Jupiter Asset Management, reckons the London Stock Exchange Group and SAP both boast ‘strong moats’:
We are focused very much on defendable business models with strong moats that are likely to be either required or will benefit from the application of AI. To that extent, much of the data that resides inside of Refinitiv inside of LSEG is likely unreplicable from the public internet by AI and will likely be required to apply AI; the fact the LSEG is in partnership with Microsoft provides is instructive. This does not mean that every single data set, or data process inside of LSEG could not be replicated more cheaply by AI but we do think there is a strong moat. The harsh sell off in the share price has left the shares looking very attractively valued for long- term shareholders; its currently trading on about 15x this year’s earnings and it generates a lot of cash flow.
Another stock we feel very confident in, with a strong moat, is SAP. SAP has also been heavily sold- down based on AI fears but we think high quality enterprise data and process structuring is a pre-requisite for apply in AI so we feel similarly confident with this stock. Like LSEG, it is very cheap after the recent sell off and excellent value for long- term shareholders.
Another factor worrying markets is that four of the biggest US technology companies have collectively announced capital expenditures that will reach about $650bn this year, as they continue to roll out AI services.
These intense spending plans, outlined by Alphabet, Amazon.com, Meta and Microsoft are causing investors to fret about the cost of rapidly deploying AI data centres in the race to dominate the sector, at a time when fears are mounting that AI will crush the business models of the data/analytics sector.
As Bloomberg explains:
The search for a comparison to the spending projections — which came as the four reported earnings in the past two weeks — requires going back at least as far as the telecommunications bubble of the 1990s, and perhaps to the build-out of the US railroad networks in the 19th century, the postwar federal investments in interstate highways or New Deal-era relief programs.
A week after its biggest daily plunge in decades, gold is having a better Friday today.
Bullion is up 3.5% at $4,934 an ounce, after a week of choppy trading.
Kelvin Wong, a senior market analyst at OANDA, explains:
“I do see a bit of a safe-haven investment coming in, but bear in mind that there is still some caution after last Friday’s selloff… we still have this fear about Iran-U.S. tension that is still intact.”
Here’s an example of the severity of the software sell-off:
Selloff in software not just the large caps … S&P 1500 Software Index has gotten chopped by -29.9% from its high.
Going back to 2010, the only selloff that was worse was the bear market in 2022. pic.twitter.com/kynJxRQdZD
— Kevin Gordon (@KevRGordon) February 6, 2026
Bank of England chief economist Huw Pill has warned there is a risk that the central bank draws too much comfort from an expected fall in inflation in April, a day after the Bank left interest rates on hold.
Pill, one of five policymakers who voted to maintain Bank rate at 3.75%, told businesses:
“There is … a risk that we draw too much comfort from the ditch in short term inflation dynamics that (was) created by the downside fiscal measures announced last November, and we lose a little bit of a track of where the inflation that is going to be the lasting dynamic in price developments that will still be there once all these one off effects fade out.”
We learned yesterday that four of the nine policymakers on the Bank’s Monetary Policy Committee voted to cut interest rates, but were narrowly outvoted, and that the Bank expects inflation to fall near to its 2% target in the second quarter of this year.
Tata Steel’s UK operations have continued to make a loss.
The metals company, which owns the Port Talbot steelworks in Wales, reported a UK loss of 741 crore (£60m) for the last quarter of 2025, on an EBITDA basis, and a 1,977 crore loss for the last nine months of the year.
Revenues for March-December 2025 fell to 17,558 crore, down from 18.,989 a year earlier.
The wider company beat forecasts, though, with consolidated net profit of 26.89 billion rupees in Q4 2025, up from 3.27 billion rupees a year earlier.
Emily Sawicz, director and industrials senior analyst at RSM UK, says:
“Tata Steel’s Q3 results show a solid group performance driven by India, but continued pressure across its European operations. While Europe has slipped into an EBITDA loss for the quarter, the more important shift is what this signals for the rest of this year.
“In the EU, protectionist measures are expected to feed through from next quarter, with carbon border mechanisms (CBAM) potentially triggering a restocking. Combined with an increase in infrastructure and defence spending this is likely to support steel prices and improve the outlook for the Netherlands business. The UK, however, is effectively locked out of these benefits. Flat demand, import quotas that exceed domestic consumption and falling prices mean the UK market remains under the most pressure of any of Tata Steel’s divisions.
“Looking further ahead, the outlook improves for 2027. The introduction of a UK carbon border mechanism, alongside Tata Steel’s transition to lower-carbon electric arc furnace production at Port Talbot, should materially strengthen competitiveness. The near-term challenge is managing the gap until those structural supports take effect, but the longer-term trajectory for the UK business is far more constructive.
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