# Amazon's $200B CapEx Shock and AI ROI

**Podcast:** Bloomberg Daybreak: US Edition
**Published:** 2026-02-05

## Transcript

Donald Trump is rewriting the Washington rule book and reshaping the global economy.
If you're trying to connect the dots behind the headlines, Bloomberg's Trumpenomics podcast is here to help.
I'm Stephanie Flanders, head of government and economics at Bloomberg.
Every week I'll bring you a smart, focused conversation with reporters and experts from Washington, Wall Street, and beyond.
Listen to new episodes every Wednesday and follow Trumpenomics wherever you listen.
Bloomberg Audio Studios, podcasts, radio news.
This is a breaking news update from Bloomberg.
Instant reaction and analysis from our 3,000 journalists and analysts around the world.
So this is for the fourth quarter, the look back.
They're lower in the aftermarket.
Down by about 4.4%.
Now 3.9%.
Bouncing around a little bit, but still lower by two and a half percent now.
Yeah, they are definitely bouncing around.
So let's see.
Let's go through some more of the numbers.
Yeah, the one that you hit that really sticks out, Carol, is first quarter net sales.
That outlook sees uh net sales 173.5 to 178.5 billion dollars.
That's within estimates of 175.54 billion.
Amazon sees first quarter operating income uh coming in.
This is really light.
16 and a half billion to 21 and a half billion.
The estimate was for 22.24 billion dollars.
So profit expected to take a hit, at least not looking like what analysts wanted to see.
Again, 22.424 billion is what analysts wanted to see.
First quarter operating income set to look 16.5 to 21.5 billion dollars.
All right, let's continue with a look back there.
Fourth quarter uh North America net sales, 127.08 billion.
The estimate was slightly above that at 127.21 billion.
You've seen this CapEx number?
Now we're getting the good stuff.
2026 CapEx, about 200 billion dollars.
That way exceeds estimates.
That estimate was for 146.11 billion dollars.
Shares moving lower in the after hours, now down by about seven percent, eight percent.
All right, so we are seeing some pressure here.
Hey, let's go through.
There's more results.
Um, as we mentioned, net sales 213.49 billion according to Bloomberg Consensus.
Um, physical stores, let's actually go to online stores.
Net sales $82.99 billion.
That's pretty much uh what the street was expecting.
The estimate was for $82.3 billion.
AWS net sales, $35.58 billion uh was the quarterly results for the fourth quarter.
Estimate was for $34.88 billion, so a little bit better than what the street was expecting.
Um, and let's go to we saw the EPS.
That was a penny light.
Where else do you want to go?
I want to go to some commentary.
Uh Amazon, I'm looking through the press release, uh, sees 2026 CapEx again, 200 billion to uh estimates of 146.11 billion.
That's the headline.
That's the story.
We're gonna stick to that one throughout the program.
We are gonna get additional details.
For example, Amazon saying that demand is strong for AI, for chips, robotics, saying strong demand for its existing offerings.
I'm looking through the press release, right?
Can I just say not strong is demand for their shares?
Because that stock right now, Amazon shares are down about nine percent, Tim, in the aftermarket.
The company is saying that AWS growing 24 percent, our fastest growth in 13 quarters, advertising growing 22 percent, stores growing briskly across North America International Chips business growing triple digit percentages year over year.
This growth is happening because we're continuing to innovate at a rapid pace and identify and knock down customer problems.
This is a quote from Andy Jassy, president and CEO of the company.
He says, quote, with such strong demand for our existing offerings and seminal opportunities like AI chips, robotics, and low earth orbit satellites, we expect to invest about 200 billion dollars in capital expenditures across Amazon in 2026 and anticipate strong long-term return on invested capital.
That 200 billion dollars is not what investors were expecting.
Again, investors were expecting 146.11 billion dollars.
That is a huge increase from those expectations.
Yeah, right now shares of Amazon, they're down about 10, almost 11 percent here in the aftermarket.
So that CapEx line, just like we saw play out with Alphabet last night, a bit of a shocker.
And certainly initially we have um investors not liking that number.
So again, Amazon seeking now 11 percent on that higher than expected 2026 CapEx forecast.
We also mentioned that companies forecast for the first quarter in terms of net sales, 173.5 billion to 178.5 billion.
Street estimate was for 175.54 billion.
So maybe a combination of potentially a lower um mark when it comes to first quarter net sales along with that higher capex, certainly creating some stress uh in terms of investors, the share price now down about 10 percent, Tim in the aftermarket.
And looking through other highlights, I mean, this is a very long press release that goes through what the company has done over the last quarter, new agentic capabilities in AWS Transform, new agentic AI capabilities for Amazon Connect.
It's an AI tool that the company says enables contact centers to provide consistent personalized customer service experiences, AWS AI factories, fastest speeds ever for prime members globally in 2025.
Shares though still taking a hit in the after hours down more than 10 percent.
I also want to point out in terms of the guidance that we're getting from Amazon.
Uh they are are saying that the Amazon guidance assumes no additional restructurings.
Those restructurings, I guess you could go as far as to say whether or not there's more layoffs.
Keep in mind, we just heard at the end of January, right, that this company's cutting 16,000 corporate jobs worldwide in an effort to remove layers of bureaucracy and increase ownership.
So we saw this company um certainly announcing some movements, some restructuring.
So we'll have to get some more clarity about what that means, what possible additional restructurings could be coming.
We'll look for that on the call.
Yeah, just looking at some updates here.
2026 CapEx, again, this is the story here.
This is the headline, 200 billion dollars above the average estimate of 146.11 billion dollars.
All right, let's get to it.
Pune Goyle's with us.
She's senior analyst for e-commerce and athleisure for Bloomberg Intelligence.
She joins us from BI headquarters out there in Princeton, New Jersey.
Um, Pune, investors not loving it.
Is it all about that CapEx number?
You know, it it is, but I think the CapEx number is fine.
We were looking for 140 billion dollars, 200 billion dollars.
Um, just continues to show that they're investing.
And I think wait, that's $60 billion more.
That's a lot of money.
Yes, but they need to invest, right?
We know that Amazon has to continue to invest in cloud services, it needs to invest in AI.
So there's a lot of catch-up that needs to be done here.
I I think the long run narrative here is still good.
The underlying results were solid across both AWS and retail.
Interesting.
And so even though they talked about seeing first quarter net sales, 173.5 billion to 178.5 billion street estimate is kind of in the middle of that 175.54.
That's okay.
Yeah, that's okay.
Like the results are are good to okay.
I I think the numbers show that Amazon continues to plug away across its businesses, and it is making progress.
And I I mean, we're we're happy with those numbers.
We think it's making the right investments.
We think it's moving in the right direction, and we think it's growing profitably.
The North America profit margins were better than expected, and um AWS at 35% is still respectable.
Okay, so if if we're if we're not too concerned about the the capex here, why are we seeing investors react like this down as much as uh 10% in the after hours, down as much as 11% in the after hours?
I think I think we'll have to see what they say on the call on where this capex is exactly going, what the backlog looks like.
I think the call was will give us a little more insight on to where they are investing, and that'll be important.
But I think you know, expecting higher capex than what we had thought yesterday, especially after Alphabet's result was what we were kind of expecting.
So so the reason Carol and I are like fighting to get to ask you this question, because maybe we're maybe we're going to the same place.
So so Andy Jassy in in the in his press release in his comments, actually has two sentences here, and one of them does mention the 200 billion dollars in CapEx.
But but he says there are seminal opportunities like AI chips, robotics, and low earth orbit satellites.
Therefore, we expect to invest about 200 billion dollars in CapEx across Amazon in 2026.
Of those AI chips, robotics, low earth orbit satellites, w where do investors want to see the investment?
Would they rather see them in AI and chips than in low earth orbit satellites?
I mean, SpaceX kind of owns that.
I I would agree with you there.
I would like to see it more on their core business rather than ancillary businesses.
So one of the things that caught my attention, I'm thinking about, you know, the jobs that they are already cutting, those corporate jobs.
We got that uh late January.
Um Pune Amazon saying guidance that they put out assumes no additional restructurings.
How do you what's your read on that?
Is is it yeah, I'm just curious.
Is it more job cuts, other shifts?
What what how what's our takeaway there?
I think you'll continue to see job cuts.
I don't think we're over.
I you know, they've highlighted it pretty clearly in their shareholder letter last year that AI is going to allow them to pair back on jobs, especially when it comes to some of those jobs that can be automated in the distribution centers and the logistics um and in the technology workspace.
So I don't think it's over.
I think there's more to come, but I do think that um they they started and they're continuing to just push through what their original plans were for now.
In terms of operating margin, 11.7%, so that was bang in line with what the street was expecting.
They're managing costs, they're getting ahead of things.
They're they're there, it that was a good thing to see that they kept that margin.
Yeah, it was actually really good.
In fact, when I look at the margin composition and I look at the North America operating profit margin, which is largely retail, that was slightly ahead of expectations at nine percent.
So that was encouraging to see their international um margins that were okay.
And AWS, once again, that's that's really where you get the margin from.
35% was right in line with expectations.
So I really think the quarter was in line to slightly better from an operating fundamental standpoint.
I think CapEx obviously higher.
We want to see where that investment is going.
But hopefully they're making the investments and where they need to to grow both the AWS and the retail business.
All right, just to recap, we've got shares of Amazon pairing their decline a little bit.
The stock has been down as much as 11% post-market, right now down about 7.5% here.
Again, some of the headlines that we have highlighted on the Bloomberg, the company says 2026 CapEx, about 200 billion.
The street estimate was 146.11 billion.
See's first quarter net sales, we've talked about this range, 173.5 billion, 278.5 billion.
Street estimate is 175.54 billion.
What else are you looking for?
I mean, obviously, more clarity in terms of what we'll get on the club but the call, but there's, you know, we were talking to Spencer Soper earlier, and he's like, there's just so much that comes out when you're dealing with Amazon.
What other clarity are you looking for from this company?
Or what other aspects?
Sure.
I I guess number one, we discussed the CapEx where it's going.
Number two, the backlog on AWS.
I think that would be an interesting point to look at.
And on the retail side, they're doing a lot, whether it's Rufus, whether it's Alexa Plus, I'd love to hear how they're integrating AI into the workflow for consumers to just make that conversion much easier.
And then what they're doing with OpenAI, right?
We we we don't know.
They there was news earlier about a $10 billion potential investment.
What does that mean?
Where is that going?
What does it do for Amazon?
What what is the actual end result here from that investment?
What about advertising?
The company calling out advertising growing 22%.
Are we are we looking at that growth?
Are we giving that enough credit?
Uh I don't know if we're giving it enough credit, but what I would say is it's still, you know, 20% plus growth is admirable for Amazon.
We think that advertising is a segment that's sometimes overlooked as we get kind of caught up into AWS.
I just say that for us, advertising is very important because it helps funnel the retail business.
It's where you get the money to fund the retail business and the growth that you're having it's um pursue, especially when it comes to physical stores is grocery, it's high profit margin, higher than the cloud business.
So clearly a very important vehicle for them as they move forward.
Where are the opportunities for advertising?
I mean, I I finally did it.
I I said yes, three dollars a month because we want to watch the night manager without any ads.
Those ads were really annoying me.
And I did it.
Um so I guess I'm part of the problem, or I guess for Amazon part of the solution.
But but where's the growth?
But but there's just so much more, right?
If you think about the retail platform, there's a lot of advertisement done just on the e-commerce aspect of the business.
When you have Alexa Plus, when you have Rufus, you know, they're embedding advertisement in all sorts of ways on the media side.
Yes, you're one of the few people that is, you know, opting out for those ads, but there are still millions of people who want it ad-free, and therefore, you know, as they increase content, especially, and now they're increasing content using AI to help facilitate even faster content.
There's just so much opportunity for advertising still.
Listen, I know this isn't your bailiwick, but I just think about Microsoft, Alphabet, like all of these, these hyperscalers, you know, when it comes to the cloud and the AI spend.
Is there a takeaway for you on all of this as you kind of watch these numbers that have come out over the last week or so?
And Alphabet, of course, was just last night.
Yeah, I think I think the big question that I'm hearing everyone ask is we continue to spend all this money, but what is the ROI on this CapEx?
How do we kind of identify what the return is on the incremental investments that they're making, whether it's in chips, whether it's in other parts of the businesses, uh help us like understand how to kind of gauge that impact.
All right, great stuff as always.
Uh covered it all.
Uh Punam, thank you, thank you.
We'll be looking for your research.
I know you're gonna be working on it later on.
It'll be on the Bloomberg Punam Goyle.
She's senior analyst for e-commerce and athleisure for Bloomberg Intelligence out there at BI headquarters in Princeton, New Jersey.
We're not done.
We're gonna stay on Amazon because we continue to see this stock.
It's off its lows.
It was down as much as eleven percent here in the aftermarket.
Now Tim just down about seven percent.
I want to bring in James Chalkmock, partner and chief investment officer at Clockwise Capital.
They've got about 70 million in assets under management.
Also, they've got the clockwise U.S.
core equity ETF ticker is T I M E and Amazon is the third biggest holding in the fund, more than five percent of the fund.
James, uh with shares down seven and a half percent.
Are you buying more tomorrow?
I don't think we'll be increasing our positions on um increasing the size of any of our positions at this juncture, with the exception of the semiconductor space.
Um, you know, we see that the CapEx numbers continue to come in ahead of expectations uh across all the hyperscalers.
Um, and uh we think you just have to follow the money in this market, and you know, we're equal weight uh roughly uh with the index uh with respect to Amazon.
Um see no urgency in the grossing of Amazon or any other uh of the megacap names.
Are are you concerned about the 200 billion dollars that Amazon will spend this year?
Obviously, it's a concern for them and for everybody else.
Um, I mean, we're we're living in a world now in a market now where you know earnings, free cash flow, return on spend, all those things are important again.
You know, just a couple of quarters ago, the you couldn't spend enough and be rewarded for it.
And now, you know, the there's the market's kind of getting religion again as it relates to um, you know, the financial performance and the financial expectations and projections uh for these companies.
And uh, you know, it was bound to become relevant again at some point, and um, you know, it really started last quarter with uh Broadcom uh in the in the month of December, and and now you're seeing it percolate across all the companies reporting in January, February.
I want to ask you about what the details are that matter, and I'm looking at some other highlights uh from the press release um from the last earnings.
They announced uh this is some of the highlights since the company's last earnings announcement include that Amazon announced new AW AWS agreements with OpenAI, Visa, the NBA, BlackRock, Perplexity, Lyft, United Airlines, DoorDash, Salesforce, U.S.
Air Force, Adobe, Thompson Reuters, ATT, SP Global, National Bank of Canada, London Stock Exchange Group, Choice Hotels, Accenture Indeed, HSBC, CrowdStrike, and more.
The reason I went through the list is because I feel like, you know, we have this question is it just about the hyperscaler spending and building out?
But what we're increasingly seeing, right, is more businesses tap into this.
Can we make the assumption at this point, James, that these are businesses that are gonna continue to have to spend with an Amazon, or for that matter, with an alphabet?
Absolutely.
I think you have to make that assumption.
I mean, the world is only going in one direction.
Productivity is only going to get uh grow, and um, and you need to leverage the infrastructure that these companies have built in order to achieve those goals and and uh capitalize on those opportunities.
That being said, um, you know, at the the the money and the profits uh do matter.
And um and we're going through a uh a transition period right now where kind of growth assumptions are being revisited, uh valuation assumptions are being revisited.
I mean, if you look at all the companies that have reported thus far, and a lot of them have traded down, I think Meta being kind of the main exception, um, estimates have gone up uh for the most part.
However, I mean Palantir is actually the poster child for this.
Estimates came up materially.
However, the stock has uh since fallen back a lot.
And what that means is when estimates go up and the stock goes down, uh that means there's m valuation compression.
And uh you're seeing the market right now north of three-time sales.
Uh valuations are uh at or near all-time highs, and you know, they have to come in.
And uh that's why you gotta stay nimble, you see you gotta stay hedged.
And um, and I don't think any of these companies are gonna be immune, with the exception of uh semiconductor companies, which are probably the only area of the market where you can likely see outperformance uh relative to expectations by the biggest margin uh on uh on earnings versus um uh other tech companies and other sectors.
So when you know when when meta platforms was it he was meta earlier this no, it was alphabet yesterday.
Yeah, meta-less.
I'm losing losing track here, James.
Thank you, Carol.
Um see Matt Miller, I'm not the only one who forgets what date it is.
When Alphabet, you know, when when other companies report uh higher than expected CapEx like Alphabet yesterday, um, you know, you see, at least in the the the knee jerk reaction, you could see like a broadcom moving higher, for example.
Who's the beneficiary of this 200 billion dollars?
I mean, it it's all the companies that you'd you'd consider, you know, within the AI ecosystem from uh NVIDIA on down.
Um, but really the what we're focused on uh in terms of our holdings is um uh where the scarcity is.
You know, we think there's scarcity in two aspects of the semiconductor industry, and that's um memory and um and manufacturing.
You know, that's why we actually took up our Intel position today.
You know, micron continues to be uh one of our top holdings.
And uh, you know, we we follow because we think that the other areas of the semiconductor landscape will increasingly become commoditized over time, and that includes Nvidia, AMD, and others.
Um, so we're focused on the areas of scarcity, and we think those will continue to accrue a disproportionate amount of the benefits.
But as far as where this CapEx spend goes, you know, I think it will be a rising tide flip-sol both situation, but who has the pricing power that and um and the and the most uh material upside estimates, that's where our focus is.
We should point out shares of NVIDIA in the aftermarket are just up about one quarter of one percent.
I'm gonna look at something like uh a micron and that stock, let me just pull it up here to see if there's any movement.
It's actually down about 1.3%.
Hey, one of the things I want to just ask you about, it's in the press release.
Amazon writing that it introduced AWS AI factories to transform customers' existing data centers into high performance AI environments, which accelerates AI build-outs by months or years compared to building independently.
So it sounds like they've got a little service, like you got a data center, we can help get you up to speed.
Is that kind of what that's about?
Well, I'm I'm hearing it real time from you right now, so I need to look into it.
But um, you know, services um are a big part of the AWS offering and an Amazon offering.
And uh that's because it's all about how do I increase utilization of my platform.
And you know, if you can educate, train um, and uh, and build awareness of the capabilities and and the trajectory of offerings, um, that will only increase utilization and stickiness and and customer attention over time.
So not surprised that they're doing something like that.
Specifics of it, um uh I need to look through.
No, that's okay.
I'm getting up to speed too.
I just looked at a press release.
This is back in uh December, and they they talked about uh by combining the latest AWS training accelerators and NVIDIA GPUs, um, and so on and so forth.
They're talking about how they can accelerate these factories.
Um, I'm just curious about AWS's own chips and accelerators.
That's a that's an important business to them.
I think it will increasingly will become okay uh an important business to them.
Um Google as well.
Um I think there's a lot of opportunity there.
It's very early days.
Obviously, there's a balancing act with NVIDIA and other players, so um not stepping on toes, but um, I think it will that's an area of optionality uh for the business that is right now uh not getting any credit.
Hey James, just an overall sentiment.
You said you're not adding any positions except semiconductors right now.
I'm just wondering how you're looking at overall sentiment in an environment where we're seeing you know a decline of of more than one percent in tech stocks on the day today.
We're seeing decline of seven and a half percent on Amazon right now.
Bitcoin's down 50 percent from its October highs.
It's it's down today.
Uh 87 nine thousand dollars.
Well, what's sentiment look like?
Is Bitcoin a leading indicator to you?
Well, um, I'll take the first part first.
The um as far as where we're adding, uh, that was with respect to technology stocks.
You know, within technology, we're exclusively adding, but uh we are adding other areas, you know, aerospace defense continues to be an area that we're uh increasing our weight, uh, we're increasing our uh sizing of um utilities uh and staples.
You know, we think that you know, any money we can pull out of um stocks that have run, um, and and the non-scaters components of technology, uh, we will we're we're putting into value with the exception of semiconductors.
As far as Bitcoin is concerned, you know, we think that this is all about leveraging the system.
You know, Bitcoin crypto has more leverage than pretty much arguably any other part of the market right now.
So you're seeing disproportionate hits from that unwinding.
And as that leverage unwinds, uh, you're seeing it trickle down into and proliferate into the other aspects uh of the market.
And um, and we're not really unsure, you know, how much leverage there is ultimately and how much more is left to unwind.
Um, so I've seen some headlines to suggest that, you know, is this uh does this uh negate the whole debasement argument, the digital gold argument for Bitcoin.
Um I would venture to say the answer to that is still no.
Um, but at the same time, there's a lot of leverage in the system, and that's unwinding, and that's gonna, I think, exacerbate pressures in the market over the short term, as we've seen thus far.
As always, um, so glad you could weigh in on this.
James, thanks so much.
James Chakmok, he's partner and chief investment officer at Clockwise Capital.
They've got about 700 uh million dollars in assets under management joining us on this Amazon Thursday.
Today's show is brought to you by Vanguard.
To all the financial advisors listening, let's talk bonds for a minute.
Capturing value and fixed income is not easy.
Bond markets are massive, murky, and let's be real.
Lots of firms throw a couple flashy funds your way and call it a day.
But on Vanguard, at Vanguard, institutional quality isn't a tagline, it's a commitment to your clients.
We're talking top grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders.
These folks live and breathe fixed income.
So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at Vanguard.com slash audio.
That's Vanguard.com slash audio.
All investing in subject to risk, Vanguard Marketing Corporation distributor.
I'm Barry Rittholz, inviting you to join me for the Masters in Business Podcast.
Every week, we bring you fascinating conversations with the people who shape markets, investing, and business.
CEOs, fund managers, billionaires, Nobel laureates, traders, analysts, economists, everybody that affects what's going on in the market, whether you own stocks, bonds, real estate commodities, crypto, you really need to hear these conversations.
Sometimes it's behaviorists like Dick Thaler or Bob Schiller.
Sometimes it's fund managers like Peter Lynch, Bill Miller, Ray Dalio.
Sometimes it's authors, Michael Lewis, author of The Big Short, and Moneyball.
Regardless of the conversation, these are the folks that move markets each week.
That's the Masters in Business Podcast with me, Barry Rittholz.
Listen on Apple, Spotify, or wherever you get your podcasts.
This is Caroline Hyde.
And I'm Ed Ludlow, inviting you to join us for Bloomberg Tech, a daily podcast focusing exclusively on technology, innovation, and the future of business.
Every weekday, we bring you the top headlines from the world's biggest tech companies.
From finance to defense, AI to entertainment, and from startups to the magnificent seven.
We highlight the latest stories of the people and companies pushing the tech sector to new frontiers and the politics that shape global tech markets.
We do this all every weekday.
Then bring you the most important conversations and analysis in our podcast.
Search for Bloomberg Tech on YouTube, Apple, Spotify, or anywhere else you listen.
Join us every afternoon on your commute home and stay ahead of the tech news cycle.
That's the Bloomberg Tech Podcast.
I'm Caroline Hyde in New York.
And I'm Ed Ludlow in San Francisco.
Subscribe today, wherever you get your podcasts.