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Amazon's $200B Gamble: Cramer Urges Faith Amidst Risks
7 Feb
Summary
- Amazon announced a $200 billion capital expenditure guide for 2026.
- The company's AWS cloud growth accelerated to its fastest pace in 13 quarters.
- Wall Street firms cut Amazon price targets due to spending concerns.
Jim Cramer advises Amazon investors to maintain patience, expressing strong faith in CEO Andy Jassy's strategy despite significant spending and associated risks. Amazon recently issued a 2026 capital expenditures forecast of $200 billion, exceeding expectations and leading to a share price drop. This substantial investment is earmarked for AWS infrastructure, AI capabilities, and custom chips.
Despite the high capital expenditure, Amazon's fourth-quarter results were robust, with AWS cloud growth accelerating to 24% year-over-year, the fastest in thirteen quarters. The AWS backlog also surged to $244 billion, indicating strong demand and efficient operations within the cloud segment.
However, the increased spending significantly impacts expected free cash flow for 2026, projecting virtually nonexistent figures. This follows a trend of heightened investment across major tech companies like Alphabet and Meta. Wall Street analysts have lowered Amazon's price targets, citing concerns about competition from Google Cloud and Microsoft Azure, and the potential disadvantage if Amazon does not deepen AI platform integration.
While Amazon's long-term strategy is expected to yield positive results, short-term volatility is anticipated. Nvidia's CEO Jensen Huang defends such large capital expenditures as appropriate and sustainable, even as Amazon, like other tech giants, develops its own custom chips.
