Why Amazon’s CEO is ‘confident’ with $200 billion spending plan

Amazon's stock experienced a significant drop of 11% in after-hours trading on Thursday, primarily due to investor anxiety surrounding the company's ambitious $200 billion capital expenditure strategy—the largest forecast among major tech firms. This spending plan represents a notable increase from the previous year's capital expenditures and exceeds analysts' expectations by more than $50 billion. In 2025, Amazon reported approximately $131 billion spent on property and equipment, a substantial rise from about $83 billion the year before. As tech companies ramp up their investments in artificial intelligence infrastructure—following the transformative introduction of ChatGPT by OpenAI in late 2022—these hefty financial commitments have continued to escalate. For instance, Google's parent company, Alphabet, announced plans to invest up to $185 billion in 2026, while Meta recently indicated that its capital expenditures could nearly double from last year, ranging between $115 billion and $135 billion. During a conference call with investors, Amazon CEO Andy Jassy faced questions from Wall Street analysts seeking more insight into the company's spending surge and its potential returns. Jassy expressed confidence that Amazon's cloud division would deliver a strong return on invested capital, although he did not specify when these gains might be realized. Analysts like Mark Mahaney from Evercore ISI urged Jassy to provide clarity on how the company plans to achieve long-term returns from these investments. Jassy emphasized the necessity of these funds to meet the growing demand for Amazon's AI computing services, which require extensive infrastructure, including data centers, chips, and networking equipment. "This isn't just an extravagant top-line pursuit," Jassy asserted. "We firmly believe these investments will yield substantial returns on invested capital, similar to what we've achieved with our core AWS business." In the latest quarter, sales from Amazon Web Services (AWS) surged by 24%, reaching $35.6 billion, surpassing analysts' forecasts and marking the fastest growth for the cloud unit in 13 quarters. Jassy noted that AWS could have experienced even faster growth if it had the capacity to meet the heightened demand, stating, "We are being incredibly scrappy around that." The cloud unit added nearly 4 gigawatts of computing capacity in 2025, and Jassy projected that this power would double by the end of 2027. Addressing questions on the AI market's evolution, Jassy described it as resembling a "barbell," with AI-native labs on one end and enterprises on the other, which are increasingly viewing the technology as a means to enhance productivity and reduce costs. He suggested that the central segment of the barbell, representing enterprises at different stages of AI application development, could ultimately emerge as the largest and most sustainable sector in the market.