Why Wall Street Is Punishing Amazon, But Not Google, For Data Center Spending Surge

Big Tech’s skyrocketing artificial intelligence spending isn't slowing down. 

While investors are demonstrating some comfort with the eye-popping sums firms are pouring into data centers and other digital infrastructure, they’re also becoming increasingly insistent that the major cloud providers prove these investments are worth it. 

Amazon announced plans Thursday to spend $200B this year building data centers and acquiring the chips and other computing equipment housed inside of them, a 60% jump in capital expenditures from 2025 that took investors by surprise.

This dramatic escalation in spending capped an earnings season in which tech companies collectively pledged to deploy close to $700B in 2026 on AI capacity — a figure equivalent to the GDP of Ireland that marks a significant jump from the year prior.

Shares of Amazon plummeted as much as 11% in the hours following the firm’s earnings report, before ending Friday down 5.5%. 

Yet Wall Street has made clear this month there is little squeamishness about massive AI spending in and of itself. 

Just a day before Amazon’s earnings release, Google unveiled plans to nearly double its capex to up to $185B in the year ahead, but it didn’t trigger a sell-off of parent company Alphabet. Neither did a similar escalation in spending by Meta in late January. 

It’s not the scale of the spending driving the negative market reactions to the quarterly number posted by Amazon on Thursday, or the similar reaction to Microsoft the week before, analysts say. Rather, investors are looking at whether tech firms can show their spending is directly driving revenue growth and a pathway to achieving a return on their massive data center investments. 

What raises red flags, Jefferies analyst Jeffrey Favuzza said, is when a firm like Amazon posts a "massive capex inflection without an equivalent positive shock in revenue."

"The Street has made it clear this quarter — there is little tolerance for capex without accompanying monetization," said Ryan Lee, senior vice president of product and strategy at Direxion.

While Google’s rising capex and expanded AI computing capacity has been accompanied by the accelerated growth of its cloud business, Amazon and Microsoft saw growth slow and market share slip even as they poured tens of billions into new AI infrastructure.

“One of the core issues that is weighing on investors is capex is growing faster than we expected and Azure is growing a little bit slower than we expected, and I think that fundamentally comes down to a concern on the ROI on this capex spend over time,” said Morgan Stanley analyst Keith Weiss, speaking in the question-and-answer portion of Microsoft’s quarterly earnings call. 

Microsoft’s capital expenditures hit $37.5B last quarter, up from $34.9B during the previous three months and higher than the company had projected. The increase comes as the Washington-based firm plans to ramp up infrastructure spending throughout 2026 in an effort to expand AI computing capacity by 80%. 

Yet while spending has surged, the company’s Azure cloud business hasn't grown in kind. Azure’s 39% revenue growth marked a 1% deceleration from the quarter prior.  

Amazon, on the other hand, saw AWS revenue grow at its fastest pace in 13 quarters, up 24% year-over-year. But despite $35.6B in capital spending and adding more data center capacity than any other company in the world, that pace of growth still trailed far behind cloud competitors Microsoft and Google, which reported cloud revenues up 48% over the year prior.

Google executives went to great lengths on its earnings call to show the firm’s massive capital spending is directly driving revenue growth. Beyond record cloud growth, CEO Sundar Pichai highlighted how new AI computing capacity is creating revenue opportunity across the company’s other business lines, particularly its search and advertising segments. 

Leadership at both Amazon and Microsoft pushed back on the line of thinking that led their stock price to drop — that their AI spending hadn’t achieved enough monetization. Both pointed to capacity constraints preventing them from fulfilling cloud contracts, framing their data center spending as investment that directly unlocks this contracted spending.

Amazon CEO Andy Jassy was also quick to attribute AWS’s comparatively slow cloud growth to the fact that it is a larger company. 

“It's very different having 24% year-over-year growth on a $142B annualized run rate than to have a higher percentage growth on a meaningfully smaller base, which is the case with our competitors,” he said Thursday. 

Still, the so-called law of large numbers hasn't seemed to impact an overall cloud market that saw revenue growth accelerate to 30% year-over-year, according to Synergy Research Group. Amazon lost market share within this expanding cloud economy, accounting for 28% of cloud spending compared to 30% last year. Microsoft and Google now have 21% and 14% market shares, respectively.