Amazon Slides on Rising Interest Rates and Soaring AI Expenses

Amazon's stock price fell by approximately 2.1% to $260.90 on Monday, August 31st, as the 10-year Treasury yield rose toward 4.75%. This increase in bond yields pushed the market-implied probability of a September Federal Reserve rate hike above 60%, according to Reuters.

The sharp rise in interest rates made Amazon's negative free cash flow harder to overlook. Despite its enormous operating cash flow, which jumped 33% to $161.4 billion in the second quarter, the company's capital expenditures are increasing at an alarming rate.

Amazon spent a staggering $66.1 billion on property and equipment purchases as it continued to invest heavily in AI infrastructure. This increased spending has put pressure on the company's free cash flow, which turned from an inflow of $18.2 billion to an outflow of $7.6 billion.

The company's share price currently sits 5.55% above its GF Value of $247.18, leaving little room for an AI payoff that takes longer than expected. When money gets more expensive due to rising interest rates, patience gets cheaper, making investors increasingly cautious about Amazon's prospects.