Andy Jassy says Amazon investors will be rewarded by its AI spending
Andy Jassy said Amazon’s Big spending on AI is not something investors should be afraid of; That’s exactly why they will be rewarded over time.
“We believe that artificial intelligence is the biggest technology transformation in our lifetime,” the CEO said on “Mad Money.” “It will reinvent every customer experience we know and completely new experiences we never imagined.”
In February, Amazon announced plans to invest $200 billion in capital expenditures this year, largely tied to its AI infrastructure. The announcement alongside fourth-quarter earnings also caused shares to fall. It took nearly two months for the stock to erase all of its post-earnings declines in early April. It has continued to rise since then, setting a new record on Monday.
The crux of the debate surrounding the stock: Can Amazon generate meaningful returns from all this spending? Skeptics also note that Amazon is projected to have negative free cash flow in 2026, according to FactSet.
Jassy argues that the scale of spending reflects how big the opportunity is. He pointed to the growth rate of its cloud unit, Amazon Web Services, as evidence that the company is investing in the right place.
“After the first three years of this incarnation of AI, our run rate is over $15 billion—260 times what it was in the first three years of AWS,” he said. AWS is expected to generate approximately $166 billion in total revenue this year, according to FactSet.
“When there are changes this big… you want to bet big,” added Jassy, who led Amazon’s cloud unit before replacing Jeff Bezos as companywide CEO in 2021.
Jassy specifically pushed back on cash flow concerns, saying critics misunderstand how Amazon makes money from those investments. Explaining that investments in data centers and infrastructure are made years before generating income, he said, “We need to determine in advance when we can convert capital and cash into money.”
But these assets have a multi-year life, allowing Amazon to generate returns over a long period of time, Jassy said.
“When your revenue growth starts to catch up with capital expenditure growth, you actually really like operating margin, free cash flow and profitability. [return on invested capital]” said Jassy. “We’ve been through this movie before, in the first wave of AWS… and I think the same story will continue, except with much higher revenue and downward free cash flow.”
