Amazon stock has lost about 7% year to date, at the time of writing, Friday afternoon, March 6, according to Yahoo Finance. Meanwhile, the SPDR S&P 500 index (SPY) is down about a little more than 1% in the same period.
The rest of the Magnificent 7 stocks are also down in the same period:
- Alphabet (GOOGL) is down almost 5%.
- Microsoft (MSFT) is down 15%.
- Apple (AAPL) is down more than 5%.
- Nvidia (NVDA) is down almost 3%.
- Tesla (TSLA) is 11% down.
- Meta (META) is 2% down.
AI bubble fears and ridiculous capex spending plans have sunk most AI-heavy stocks, dragging the S&P 500 down. I explained how the AI bubble works in my article “AMZN, MSFT, NVDA, SFTBY setting $100 billion on fire.”
Since the article posted, we have learned about the outcome. Microsoft didn’t invest. OpenAI touted a successful $110 billion founding round, even though the total sum isn’t guaranteed.
Amazon has pledged up to $50 billion, starting with $15 billion.
If we look at FORM 8-K, it states: “Amazon Sub is obligated to purchase all remaining Commitment Shares upon the earlier to occur of (i) OpenAI meeting specified milestones, and (ii) OpenAI directly or indirectly consummating an initial public offering or direct listing of equity securities in the United States (a “Public Listing Transaction”), in each case subject to certain terms and conditions.”
The funny thing is, the “specified milestones” mean reaching artificial general intelligence (AGI), according to The Information‘s sources.
If the sources are correct in their understanding that AGI ain’t happening, and considering the second clause — which concerns the IPO and is bound to face big hurdles, considering the current valuation of the company — more than $15 billion investment from Amazon is highly unlikely.
As a part of this deal, OpenAI and Amazon Web Services (AWS) have expanded their existing $38 billion agreement by $100 billion over eight years. OpenAI has committed to consuming approximately 2 GW of Trainium capacity through AWS infrastructure.
Another important AWS customer is Anthropic.
Bloomberg has reported that Anthropic’s annualized revenue run rate (ARR) surpassed $19 billion, and is up $9 billion from the end of 2025.
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Bank of America says “rapid Anthropic growth could support AWS investment sentiment change”
Following the release of Bloomberg’s report, Bank of America analysts Justin Post and Steven McDermott updated their opinion on Amazon stock.
Analysts said the recent acceleration in Anthropic’s ARR and a new capacity agreement with OpenAI signal strong enterprise demand for AI services, which should continue to support AWS backlog growth acceleration.
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Post believes that, as Anthropic’s ARR growth indicates a $2.5 billion or larger QoQ revenue increase.
He said if we assume that a significant share of Anthropic’s workloads run on AWS, and that AWS will get half of Anthropic’s projected $12 billion in 2026 model-training costs (according to Forbes), this would give an approximately $1 billion QoQ increase in Q1 AWS revenue from Anthropic.
Analysts noted that concerns that higher revenue will drive even more investments will likely continue. However, they believe that AWS can monetize additional capacity at a higher rate than the Wall Street consensus estimates, providing more confidence in near-term capex return on investments.
In a research note shared with me, Post reiterated a buy rating and the target price of $275.
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The target price is based on his sum-of-the-parts analysis that values AWS at 8x 2027 sales, first-party retail at 1.0x, third-party retail at 2.5x, and advertising at 5.0x. Post’s price target implies 3.3 times blended price-to-sales ratio, 12 times 2027 EBITDA, and 29 times 2027 EPS.
Analysts noted a downside risks for Amazon:
- Increasing competition from offline and local retailers
- AWS client cost optimization impact on revenues and margins
- Regulatory pressure on the third-party marketplace
They also noted that the stock has been subject to heavy volatility in the past, based on margin trends, and that this volatility could increase due to economic uncertainty.
Amazon strengthens regional infrastructure
With the theme of capex spending being the main focus for the company this year, we can see Amazon is successfully executing its plans.
AWS announced the availability of Amazon EC2 I8ge instances in the Europe (Ireland) AWS region.
According to the company, these new instances are powered by 5th-generation Intel Xeon Scalable processors with an all-core turbo frequency of 3.2 GHz, offering up to 40% better compute performance and 20% better price performance over existing I3en instances.
I8ge instances offer up to 120TB of local NVMe storage density and deliver up to twice as many vCPUs and memory as prior-generation instances.
The company stated that these instances, powered by 3rd generation AWS Nitro SSDs, achieve up to 65% better real-time storage performance, up to 50% lower storage I/O latency, and 65% lower storage I/O latency variability compared to I3en instances.
High-density storage-optimized instances, such as I8ge, are intended for workloads that demand rapid local storage with high random read/write performance and consistently low latency for accessing large datasets.
Related: 5-star analyst resets Broadcom price target before earnings
