Why Amazon Stock Lost 12% in June
Key Points
Amazon said it would spend $200 billion this year on the AI business.
The AI business is thriving, and AWS had its highest sales increase in 15 quarters.
The market is worried about its ability to benefit from the investments.
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Amazon (NASDAQ: AMZN) stock lost 12% in June, according to data provided by S&P Global Market Intelligence. There's a long list of artificial intelligence (AI) concerns that have led to this point, and many of the hyperscalers and other top AI stocks have been dropping of late.
Hyperscalers and hyper spending
The average U.S. shopper knows Amazon as an e-commerce giant. It's part of the fabric of society at this point, with its trucks a regular feature on U.S. roads and highways. However, it has many other growing businesses, in particular Amazon Web Services (AWS), its cloud services provider that houses its AI business.
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Image source: Amazon.
AWS has been on fire, and the AI business is thriving. Amazon has a huge assortment of AI tools that can code with prompts, create AI agents, and whip up marketing campaigns in minutes. AWS is the largest cloud provider in the world, with almost a third of the entire market, and its millions of clients are engaging with AI through its platform. In the 2026 first quarter, for example, its Strands agentic AI tool was downloaded 200% more times than the previous quarter. Users of its Kiro developer tool more than doubled sequentially, and Kiro enterprise customer usage increased almost 10-fold.
The platform is also bringing in more sales to AWS, which increased 28% year over year, the fastest pace in 15 quarters.
It's coming at a cost, and it's not just the cost of creation. Amazon stock had already been crushed by its spending habits, which had been alarming the market. Management said it would spend $200 billion in capital expenditures this year, and although it doubled down on its assertion that this was necessary to position itself for a windfall, the stock tanked anyway. It had made a rebound after its fantastic first-quarter report, but now the next worry is on the table as the AI race continues. With many players and lots of competition, the latest fear is that the spending may not be recouped, even as the technology thrives. According the law of supply and demand, a plethora of options could drive prices down, and the biggest spenders could end up being the biggest losers.
Don't give up on Amazon
CEO Andy Jassy explained that it's in a high-investment phase as it prepares to monetize its spending. There's a cash-crunch in laying the groundwork, but not only has it paid off quickly in the past, the infrastructure also lasts for decades.
The market's fear is reasonable, but Amazon is well-positioned to bounce back and reward patients shareholders.
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
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