The $200 Billion Reason Amazon Could Be an Overlooked AI Winner

Most of the attention in the artificial intelligence (AI) trade has focused on chipmakers, led by Nvidia. But this year's biggest spender on AI infrastructure hasn't been the same beneficiary of Wall Street's euphoric sentiment that has led to soaring stock prices for many chipmakers.

We're talking about Amazon (NASDAQ: AMZN), of course.

When the company told investors in February that it would put about $200 billion into capital expenditures in 2026, the stock dropped to around $198 as the scale of the spending unnerved a market already anxious about when the build-out would pay off. And even with the stock recovering to levels above $250 more recently, shares are still meaningfully trailing the S&P 500's returns over the last five years and are up just 10% this year -- far behind the gains many AI beneficiary stocks have seen in 2026.

But that $200 billion may arguably be the very reason Amazon ends up an overlooked winner of the AI era. The spending funds two things at once: one of the largest blocks of AI computing capacity in the world, and Amazon's own chip business, which is growing extraordinarily fast.

Image source: Getty Images.

Spending into demand

Importantly, most of the $200 billion is headed to Amazon Web Services (AWS), the company's cloud computing business -- and the spending is following demand rather than running ahead of it. AWS revenue rose 28% year over year in the first quarter to $37.6 billion, its fastest growth in 15 quarters, accelerating from 24% in the fourth quarter of 2025 and 20% in the third. That lifted the segment to a $150 billion annual run rate, and its operating income climbed to $14.2 billion from $11.5 billion a year earlier.

Behind that growth sits a backlog of committed customer spending that reached $364 billion at the end of the quarter, and that figure doesn't include a recently signed agreement with AI lab Anthropic worth more than $100 billion.

The $200 billion is still the largest single-year capital plan among the big technology companies. The next largest, Alphabet, has guided to as much as $190 billion in 2026. For Amazon, it marks a steep jump from roughly $130 billion in 2025, with the bulk earmarked for AWS.

The chip business few are watching

What gets less attention is that Amazon has quietly become a substantial chipmaker. The custom silicon it designs for AWS -- its Trainium and Graviton processors, plus Nitro EC2 network interface cards -- topped a $20 billion annual revenue run rate in the first quarter, after nearly 40% quarter-over-quarter growth, and is growing at a triple-digit rate year over year.

And on the company's first-quarter earnings call, CEO Andy Jassy said Amazon's custom-silicon operation is now, by the company's own estimate, "one of the top three data center chip businesses in the world."

Amazon has more than $225 billion in revenue commitments for its Trainium chips, including multiyear, multi-gigawatt deals with AI labs Anthropic and OpenAI. Further, its Trainium2 offers about 30% better price-performance than comparable graphics processing units (GPUs) and is largely sold out, while the newer Trainium3, which began shipping early this year, is nearly fully subscribed, management explained in Amazon's most recent earnings call.

Designing its own chips lets Amazon fill its data centers with cheaper computing power and keep the margin that would otherwise go to outside suppliers -- a key cost problem at the center of the AI build-out.

But this big spending is also a risk. It has nearly erased Amazon's free cash flow, which fell to $1.2 billion over the trailing 12 months -- from $25.9 billion a year earlier, even as operating cash flow rose 30% to $148.5 billion. Should demand for AI capacity cool before this year's data centers and chips earn their keep, the strong returns management expects could fail to be realized.

And at a price-to-earnings ratio of about 32 as of this writing, the stock isn't cheap.

For investors who believe the AI build-out has years left to run, Amazon looks like one of its quieter beneficiaries -- a company building the capacity and increasingly making the chips to fill it. With that said, the spending makes it a higher-risk holding, so a smaller position may be the prudent way to own it.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Nvidia. The Motley Fool has a disclosure policy.