For months, the market treated Amazon’s AI spending as a liability. After Thursday’s earnings report, it suddenly looks like the company’s strongest asset. The stock jumped more than 15 percent in a single session, closing Friday at EUR 235.65 — within striking distance of the 52-week high of EUR 238.05.
The catalyst was a familiar name: AWS. The cloud division grew 37 percent year over year, its fastest clip in 18 quarters, with revenue reaching $42.2 billion and beating analyst expectations. That growth figure is precisely the validation management needed for its aggressive capital expenditure program.
The Bill for the Buildout
Amazon raised its 2026 investment budget from $200 billion to roughly $220 billion last week, citing surging memory chip prices and capacity constraints in AI-ready data centers. CEO Andy Jassy has acknowledged that demand will likely outstrip the company’s own capacity through 2027.
That spending has a visible cost. Free cash flow over the trailing twelve months has turned negative, at minus $7.6 billion — an unusual position for a company long celebrated for its cash generation. But the framing has shifted: what was once dismissed as “too expensive” is now being read as “necessary scaling.”
The operating profit picture deserves a closer look. Amazon reported net income of $62.65
The Bull Case: An Ecosystem Locking In
The consensus analyst price target sits at EUR 271.37, implying roughly 15 percent upside from current levels. Three pillars support that view.
First, the chip strategy. Amazon’s in-house Trainium and Graviton processors are now generating an annualized revenue run rate above $25 billion, growing at triple-digit rates. Both Anthropic and OpenAI have committed to multi-year agreements for Trainium2 and the upcoming Trainium3, which promises 40 percent better energy efficiency.
Second, logistics automation. More than one million robots now operate across Amazon’s fulfillment network. The next frontier is “Container Build,” the last major process still heavily reliant on manual labor. Success there would meaningfully improve retail margins.
Third, the AWS backlog. At $496 billion and still growing at triple-digit rates, this order book gives the market reason to tolerate heavy investment — at least while it keeps expanding.
Should investors sell immediately? Or is it worth buying Amazon?
The Bear Case: A Heavy Tab
The flip side is the sheer scale of the commitment. The $220 billion budget has pushed free cash flow into negative territory, a rarity for Amazon in recent years. Rising memory chip prices were a primary driver of the $20 billion budget increase, and further supply chain tightening or higher data center energy costs would push the return on invested capital even further out.
Technically, the stock is stretched. The RSI of 67.2 signals an approaching overbought condition. After a 15.43 percent gain in seven days, annualized volatility sits near 52 percent. If the first attempt to break through EUR 238.05 fails, a pullback toward the 50-day moving average at EUR 213.98 is plausible.
There’s also a risk outside the cloud business. Project Kuiper — now branded Amazon Leo — needs more than 20 launches in 2026 to meet revised FCC requirements. Any delays in transitioning to heavy-lift rockets like Vulcan or Ariane 6 could push the planned commercial beta launch, currently set for late 2026, further out.
Regulatory and Commercial Crosswinds
The EU’s AI Act takes effect today, August 2, 2026, with penalties reaching EUR 35 million or 7 percent of global turnover. Amazon’s AI models and its Anthropic stake — which just generated the bulk of its reported profit — will likely draw particular scrutiny.
Meanwhile, the company is expanding its consumer finance footprint. In Germany and Austria, Amazon is launching PayPal installment payments this month for orders between EUR 30 and EUR 10,000. It doesn’t replace the standard PayPal checkout, but it opens the door to a consumer credit business that could partially offset infrastructure costs.
What Matters Next
The stock remains above its 200-day moving average of EUR 202.93, keeping the medium-term trend intact. The key level for the coming week is EUR 238.05 — a sustained breakout could open the path toward the EUR 271.37 analyst target.
Two signals will likely determine the direction: progress on Amazon Leo launches and the integration of Trainium3 into enterprise data centers. If third-quarter guidance shows AWS cooling, or if another round of memory chip price increases forces another budget revision, attention will snap back to that negative free cash flow — and the rally could stall.
Jassy’s long-term thesis is bold: with 85 percent of global IT spending still on-premises, he sees AWS eventually reaching $1 trillion in annual revenue, more than triple its current run rate. The market’s new willingness to fund that vision is the real story behind Friday’s surge. Whether that patience holds through the next few quarters is the question that will define the stock’s trajectory.
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