Amazon shares have entered a stormy patch, sliding roughly 14% from their early May peak as investors grapple with a punishing mix of regulatory scrutiny, a labour-relations setback, and the sheer scale of the company’s artificial-intelligence investment programme. The stock closed Monday at €203.85 in Europe, its lowest level in ten weeks, after shedding nearly 5% in a single session. On a weekly basis the loss amounts to about 4%, driven by a broad tech sell-off that has compounded company-specific headwinds.
The most immediate catalyst for the nervousness is the capital expenditure plan. Amazon intends to pump around $200 billion into AI infrastructure in 2026, up from $131 billion the prior year. The cash burn is already visible in the first-quarter numbers: free cash flow cratered by 95% year-on-year to just $1.2 billion. That figure stands in stark contrast to the robust performance of Amazon Web Services, which posted a 28% revenue increase to $37.6 billion in the first quarter, with operating margins hitting a record high. Analysts at Citi project AWS growth accelerating to 30% for the full year and 37% by 2027 as AI workloads shift from testing into full-scale deployment.
While the market fixates on the $200 billion outlay, Amazon kicked off its annual Prime Day on Tuesday — this year expanded to four days for the first time and moved to June. Adobe Analytics expects total U.S. e-commerce spending during the event to reach roughly $26.3 billion, a 9% jump from 2025. Bank of America estimates Amazon’s own gross merchandise value at $21.6 billion, split between $11.6 billion from first-party sales and $10 billion from third-party merchants. The company is also using the shopping festival to test its new AI shopping assistant, “Alexa for Shopping,” part of a broader push to become the largest U.S. apparel retailer by market share (currently 13%) by year-end.
Yet even the Prime Day optimism is being overshadowed by the regulatory and legal challenges that have emerged on two fronts. The Federal Trade Commission has opened an investigation into Amazon’s advertising practices, focusing on minimum price requirements. Advertising is the company’s fastest-growing profit engine, with revenue advancing 24% over the past twelve months to exceed $70 billion. Any restriction on that business would hit margins hard at a time when every dollar is needed to fund the AI build-out.
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Separately, a U.S. labor judge ruled on Monday that Amazon must negotiate with the Teamsters union at its San Francisco facility, finding that management had violated federal labour law in its dealings with workers. Amazon has dismissed the allegations as unfounded, but the ruling creates a precedent that could encourage further organising and work stoppages across its logistics network.
Despite the barrage of negative news, analysts remain broadly bullish. Jefferies recently raised its price target from $275 to $300, citing improving AWS margins. The consensus of 45 analysts points to an average target of roughly $319, with all carrying a “Strong Buy” recommendation. Technically, the relative strength index stands at 37.9, close to the oversold threshold, and the 200-day moving average near €199.82 offers a potential support zone about 2% below the current quote.
Investors now have several near-term catalysts to watch. U.S. inflation data due Thursday could sway Federal Reserve rate expectations and, by extension, the valuation multiples of growth stocks. The Prime Day results, expected shortly after the event concludes on June 26, will provide a first read on whether retail strength can offset some of the capex drag. For a clearer picture of the underlying earnings trajectory, the market will have to wait until July 30, when Amazon reports second-quarter results. Until then, the tension between a cash-guzzling AI bet and the still-robust fundamentals of its retail and cloud businesses is likely to keep the stock in a volatile trading range.
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