Amazon shares tumble as it joins the Big Tech AI spending spree

Amazon has joined other US tech giants in announcing a huge increase in spending on artificial intelligence (AI) projects and infrastructure.

Reporting its annual financial figures on Thursday, Amazon said it expected to spend $200bn (£147.7bn) this year on building out its business, much of it on AI.

That is a big increase from last year, when it spent $125bn. But the announcement did not appear to be welcomed by investors as its shares fell by more than 11% in after hours trading.

While Amazon’s spending plans are now the most aggressive among the Big Tech companies, including Meta, Google and Microsoft, collectively they expect to spend around $650bn on AI and related projects this year.

Amazon mentioned plans to spend on “AI, chips, robotics, and low earth orbit satellites,” but chief executive Andy Jassy was clear during a call with financial analysts that the bulk of spending was going towards AI.

“It’s an unusual opportunity,” Jassy said of AI and how it will become profitable in the future. “I passionately believe every customer experience we have today will be reinvented by AI.”

“We’re going to invest aggressively,” Jassy added.

Brian Olsavsky, Amazon’s chief financial officer, noted that the company was looking at cost reductions elsewhere as it ramps up spending. Last week, Amazon laid off another 16,000 workers after cutting 14,000 roles in October.

Leaders of other companies planning to spend more than ever this year on AI projects and related infrastructure have struck a similar tone.

Meta boss Mark Zuckerberg said last month that the company is going to spend up to $135bn this year, nearly double the amount of money it did a year ago.

The owner of Facebook, Instagram and WhatsApp is working on training its AI models, building out data centres and buying the computer chips that are required to operate AI tools. But Zuckerberg also pointed to the use of AI by technical workers, saying that fewer people are now needed on big projects.

Zuckerberg predicted “2026 to be the year that AI dramatically changes the way we work.”

Google’s CEO Sundar Pichai said he expected his firm to spend even more than Meta on AI, planning to more than double its capital expenditure to $185bn this year. The company is expanding its technical infrastructure related to AI, including servers and data centres.

While Microsoft did not say exactly how much it intends to spend over the course of its financial year, it has so far spent over $72bn on recruiting talent and infrastructure related to AI, while executives have made no mention of pulling back spending.

Such aggressive spending is coming at a time that investors appear more interested in clear lines of revenue from ever-more costly AI-related projects.

Shares of Meta, Microsoft, Google and Amazon have fallen in recent days, despite increasing revenues and profits.

The S&P 500 stock index, which includes all of those companies and many more in the broader technology sector, fell by more than 1% on Thursday, adding to a week of losses from an all-time high reached at the end of January.

By BBC News