Amazon's AI Spending Looks Less Risky as Demand Continues to Outstrip Supply

Amazon's massive capital expenditure of $220 billion has raised concerns among investors about the company's AI spending. However, a recent earnings report reveals that the retail giant is not just throwing money at the problem, but rather investing in a strategy with strong potential for long-term returns.

The company's AWS backlog of $496 billion, which has tripled year-over-year, suggests that Amazon is racing to keep up with demand. In fact, management stated that AWS does not have enough infrastructure to meet current demand in 2026, and capacity constraints are expected to continue into 2027.

Amazon's core business shows no signs of slowing down, with revenue climbing 20% year-over-year to $200.6 billion in the second quarter, and earnings increasing to $5.75 per share compared to $1.68 per share in the same period last year.