Amazon Slumps 11% as FTC Lawsuit and AI Spending Concerns Mount

Amazon's stock has taken a significant hit this week, plummeting over 11% from its all-time high set in August. The company's underperformance compared to the broader market is now more pronounced than ever, with Amazon's shares up about 10% in 2026, trailing the S&P 500's 12% gain over the same stretch.

The immediate trigger for this week's slide can be attributed to a lawsuit filed by the Federal Trade Commission and 22 states against Amazon over its advertising practices. The complaint alleges that Amazon overcharged roughly 1.2 million advertisers by more than $20 billion between 2019 and the present, using undisclosed reserve-pricing mechanisms.

Regulators claim that these mechanisms quietly pushed up costs for advertisers, which likely trickled down to consumers as well. Amazon has disputed this characterization of its pricing practices, stating that advertisers continue to receive strong value from its platform.

The advertising business has become one of Amazon's most profitable segments in recent years, and investors are reacting to the possibility that a legal fight could squeeze margins on this crucial revenue stream. While some analysts see this as an opportunity, others are more cautious, pointing to Amazon's ballooning AI infrastructure spending as another pressing concern.

The company has announced a significant expansion of its 2026 capital expenditures budget, raising the figure to approximately $220 billion. Analyst Mark Mahaney now estimates that Amazon's capital expenditures will climb to $320 billion in 2027 and $370 billion in 2028, projecting negative free cash flow of roughly $50 billion in each of those two years.