Amazon Stock Enters Correction Zone Amid FTC Lawsuit and AI Spending Concerns
Amazon's stock has entered a technical correction after declining around 11% from its all-time high in August. The decline is significant, as it brings Amazon shares below their key 100-day moving average. This technical indicator suggests that investors are becoming increasingly concerned about the company's prospects.
The decline is also notable because it comes amid two major factors: a lawsuit filed by the Federal Trade Commission (FTC) and 22 states against Amazon, alleging its advertising practices overcharged advertisers by $20 billion from 2019 to present. Additionally, concerns are growing about Big Tech spending on AI infrastructure.
Citi analyst Ronald Josey defended Amazon's stock, stating that investors should take advantage of any dislocation in shares due to the FTC suit. He believes that advertisers continue to allocate more spend to Amazon based on results, and that Amazon's other business segments, such as AWS and retail, are performing well.
However, EvercoreISI analyst Mark Mahaney warned that Amazon's aggressive spending on AI infrastructure is likely to lead to negative free cash flow in 2027 and 2028. He estimates that Amazon's capital expenditures will reach $320 billion in 2027 and $370 billion in 2028.