Home World News Amazon is joining Big Tech’s rising spending as the AI ​​race heats up

Amazon is joining Big Tech’s rising spending as the AI ​​race heats up

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Amazon is joining Big Tech's rising spending as the AI ​​race heats up

Amazon’s total revenue is expected to grow 10.6% to $148.56 billion, the slowest increase in five quarters

Amazon.com is expected to join Google and Microsoft on Thursday to report a rise in capital spending on artificial intelligence, as Big Tech companies rush to capitalize on the booming technology.

According to LSEG data, the e-commerce giant’s capital expenditures – mainly for building cloud and generative AI infrastructure – are expected to rise 43% to $16.41 billion in the second quarter. That represents an increase of approximately $1.5 billion from the previous three months.

The high spending is also expected to put pressure on Amazon’s margins, which will outweigh the benefits of cost savings and supply chain efficiencies that support retail profitability.

The company’s Amazon Web Services (AWS) business has long dominated the cloud computing market, but has faced stiff competition from Microsoft in recent quarters after the Windows maker rolled out AI-powered services to its Azure cloud business.

In response, Amazon has partnered with companies like Anthropic and offered startups free credits to cover the costs of using large AI models to increase the market share of its AI platform Bedrock. A new head of the AWS unit was also appointed in May.

Microsoft and Google parent Alphabet also said earlier this month that they would continue investing, even if the AI ​​payout is taking longer than some investors had hoped. This has hammered Big Tech stocks, whose valuations have soared this year on the promise of AI.

“Amazon’s capex spend will certainly be closely watched. AI adoption has been slow and the focus is on smaller companies that have struggled in the high interest rate environment,” said Ben Barringer, analyst at Quilter Cheviot.

“We expect AWS to accelerate developments in AI in the future.”

Amazon shares are up about 23% this year. The stock has fallen more than 6% since July 8, when it hit a record high, as part of a broader market sell-off led by US megacaps.

According to LSEG data, growth at AWS is likely to have remained similar to the previous quarter at just over 17%. But Morgan Stanley analysts said: “AWS needs to grow more than 18% to… assure investors of AWS’s (AI) positioning and its ability to generate high growth during this period of heavy capital investment.”

Due to the increase in spending, Amazon’s gross profit margin growth is expected to have slowed to 1.3% in the April-June quarter, compared to 2.6% in the previous quarter and an average of 2.7% over the past two years.

North American retail growth is likely to have slowed to 8% between April and June from 12.3% in the January-March quarter, amid signs of a broader slowdown in consumer spending and some competition from new and fast-growing Chinese players like Temu. and Tiktok Shop attracting more American buyers.

Amazon’s total revenue is expected to have grown 10.6% to $148.56 billion – the slowest increase in five quarters.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

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