Stock Market Today, Nov. 5: Amazon Shares Slide as Technology Selloff Erases Early Gains

Amazon.com (NASDAQ:AMZN), a global e-commerce, cloud computing, and logistics platform, closed at $260.21, down 2.19%. Thursday's move reflected early election-related gains that faded as technology selling and higher yields took over. Investors are watching the company's AWS cloud computing division's profitability and AI infrastructure spending next.

Trading volume reached 83.5 million shares, coming in about 117% above its three-month average of 38.5 million shares. Amazon.com IPO'd in 1997 and has grown 265,645% since going public.

How the markets moved today

The S&P 500 (SNPINDEX:^GSPC) closed at 7,354, down 4.36%, while the Nasdaq Composite (NASDAQINDEX:^IXIC) closed at 24,315, down 5.52%. Among e-commerce, digital advertising, and retail logistics peers, Walmart closed at $127.72, down 1.12%, while Costco Wholesale closed at $1,065.59, up 1.83%.

What this means for investors

On Thursday, Nov. 5, Amazon shares gained during early trading after the company announced a partnership with Uber that provides its Prime members with free restaurant-delivery benefits through Uber Eats. However, that didn't last, as a broad sell-off of tech stocks took place today in the wake of U.S. midterm election results.

The Democratic Party gained control of Congress, raising worries that incoming Democratic leadership could demand tighter AI regulations and put a hold on data center construction projects key to the artificial intelligence (AI) boom. This could result in a major impact to Amazon's AWS business just as the company is spending substantial sums to expand its AI infrastructure.

At the same time, Wall Street is concerned about the e-commerce giant's AI costs. Last week, Amazon's third-quarter earnings report missed revenue estimates while the company's capital expenditures continued to rise, resulting in negative Q3 free cash flow (FCF) of $42.4 billion compared to positive FCF of $14.8 billion in the previous year.

In a macroeconomic environment of rising interest rates, which makes borrowing to fund an AI buildout more expensive, and persistent inflation likely to impact consumer spending and Amazon's sales, the company is facing a challenging time right now. But over the long run, its AI investments could position it for success. Management forecasted AWS revenue to grow by 40% year over year in 2027 and 2028 as well, thanks to strong demand for its AI offerings.

Robert Izquierdo has positions in Amazon, Uber Technologies, and Walmart. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, and Walmart. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.