Amazon shares have been under significant pressure following the company’s latest earnings report, enduring their worst losing streak in nearly two decades. In response to mounting investor skepticism, Matt Garman, the head of Amazon Web Services (AWS), has publicly defended the tech giant’s ambitious capital expenditure roadmap.
A Historic Stock Decline
The sell-off commenced on February 5th with Amazon’s announcement of a planned $200 billion investment program for 2026. This figure represents a substantial increase over the $132 billion spent in the preceding twelve months. The news triggered a nine-session decline—the longest consecutive drop since 2006—with the stock shedding 18% of its value by February 13th. This erased approximately $463 billion in market capitalization and pushed the share price to its lowest closing level since May.
Market strategist Anthony Saglimbene of Ameriprise articulated a widespread concern: “Should Amazon’s spending grow to a point where cash flow turns negative, it becomes a serious issue. Investors are increasingly viewing this as a warning signal.”
AWS Leadership Pushes Back on Concerns
In a recent CNBC interview, AWS CEO Matt Garman countered this narrative head-on. He asserted that customer demand will continue to outstrip supply for years to come. Despite the massive planned outlays, Garman stated AWS expects to remain “capacity constrained for the next several years” and is confident it will sell “every single server and every single bit” of capacity it can bring online.
He further highlighted the diversified nature of AWS’s customer base as a key strength. Unlike some competitors whose order books are more heavily reliant on single large clients like OpenAI, Amazon’s risk is spread across a broad portfolio. The company’s total contract value stands at $244 billion, of which OpenAI accounts for only $38 billion.
Underlying Business Momentum Remains Strong
The defense from leadership is backed by robust fourth-quarter financial results, which demonstrated accelerating growth:
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- AWS Revenue Growth: Accelerated to 24% from 20% in Q3, marking the division’s strongest growth rate in 13 quarters.
- Advertising Revenue: Rose 23% to $21.3 billion.
- Net Income: Reached $21.19 billion, or $1.95 per share.
- Q1 2025 Guidance: Projected revenue between $173.5 billion and $178.5 billion.
CEO Andy Jassy pointed to triple-digit growth in the company’s custom chip business as evidence of Amazon’s broad-based innovation capabilities.
Strategic Semiconductor Partnership Announced
Adding to its strategic moves, Amazon revealed a multi-billion dollar, multi-year partnership with STMicroelectronics on February 9th. Under the agreement, ST will become a strategic supplier of advanced semiconductor technologies for AWS’s compute infrastructure.
As part of the deal, ST issued warrants to AWS, granting the right to acquire up to 24.8 million ordinary shares at an exercise price of $28.38 per share.
Valuation Nears Historic Lows
The recent downturn has left Amazon stock trading at roughly 25.8 times expected earnings, one of its lowest price-to-earnings multiples in recent history. Shares have retreated approximately 23% from their all-time high near $260.
The coming quarters will prove decisive, testing whether the company’s multi-billion dollar bets on artificial intelligence and cloud infrastructure will generate the anticipated returns. Garman, however, projects unwavering confidence, framing the challenge not as one of demand, but of supply: the customers are there, and the task is now to build the capacity to serve them.
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