Amazon's e-commerce faces pressure as Cloud leads the way

Amazon’s costly push into artificial intelligence has failed to excite investors so far, leaving its stock up just 3% in 2025. It is less than half the S&P 500’s 7% gain and far behind Meta’s 20% jump.

While many tech giants have seen their shares surge this year as investors cheer AI budgets, Amazon.com Inc. is stuck in neutral.

Artificial intelligence has again become the dividing line between winners and laggards in the technology sector. Earlier in the year, shares fell on worries that low‑cost models from China could flood the field, but optimism has since returned.

Microsoft Corp., Meta, and Nvidia Corp. are the biggest individual contributors to the S&P 500’s gain in 2025, as reported by Bloomberg. Apple Inc., seen as moving more slowly in AI, has slipped.

Portfolio manager Brian Recht of Janus Henderson says the market is not giving Amazon much credit for AI. He added, “Investors want to see whether Amazon can actually deliver on using it for improved profitability, but we think evidence of AI benefits will become clearer by the quarter.”

Amazon’s e-commerce faces pressure as Cloud leads the way

Amazon’s mix of businesses, from cloud computing to advertising, normally gives it a cushion. But tariffs are hurting Amazon’s main online‑shopping business, which still brings in most of its revenue.

Most outside attention stays on Amazon Web Services. Analysts expect demand for cloud rentals to climb as customers rush to train and run AI models.

Recht argues the retail side may feel just as much impact. Management calls AI a better way to match ads, steer customers to the right goods, and cut costs in warehouses and the delivery network.

Amazon is also rolling out “Rufus,” a chatbot that guides shoppers through product choices, review summaries, and price comparisons.

On 31 July, the Seattle company will issue its second‑quarter results. Wall Street’s consensus, collected by Bloomberg, points to earnings of $1.32 a share on sales of $162 billion. Those figures would mark year‑over‑year increases of 4% and 9%. For the Magnificent Seven group of big tech names, average profit is forecast to climb 15% on revenue growth of 12%.

Capital spending underscores Amazon’s push. At an expected $104 billion in 2025, the figure is the largest in the S&P 500, as per the data. The total covers servers, networking gear, and the bricks and mortar that keep the delivery engine running. In June, the company disclosed at least $30 billion in planned spending on data centers in Pennsylvania and North Carolina.

Savings from automation are another theme. Last week, Amazon trimmed jobs in its cloud unit, saying it must “optimize resources” and invest more in new projects. Chief Executive Officer Andy Jassy recently told staff he foresees a smaller headcount over the next few years as artificial intelligence takes on repetitive tasks.

Robotics adds to the potential

The Information reported in June that Amazon is testing an indoor obstacle course to train humanoid robots meant to speed up parcel handling. Bank of America figures suggest using such machines could save more than $7 billion a year by 2032.

Morgan Stanley analysts wrote last month that these gains make the retail division “the most under‑appreciated GenAI beneficiary in the tech space.”

Irene Tunkel, chief U.S. equities strategist at BCA Research, agrees. “Retail margins are narrow, so Amazon needs all the productivity boosts it can get, and there are huge use cases for AI and robotics within warehouses,” she said. Tunkel sees the payoff unfolding over five to ten years and believes Amazon’s head start gives it an edge.

Whether investors decide to reward that lead will become clearer after the company releases its next set of numbers very soon.

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