HJBC
Amazon (NASDAQ:AMZN) swung lower during the company’s earnings conference call on Thursday after CEO Andy Jassy highlighted some of the constraints in meeting AI demand, chiefly electricity and chip availability.
“I don’t believe that we will have fully resolved the amount of capacity we need for the amount of demand that we have in a couple of quarters. I think it will take several quarters, but I do expect that it’s going to get better each quarter,” he noted.
Jassy also countered the idea that Amazon (NASDAQ:AMZN) may have fallen behind in the AI arms race.
In terms of the company’s AI-intensive capex spending, Jassy said the Q2 spend of $31.4 billion will be reasonably representative of the quarterly capital investment rate for the back half of this year. Pushing aside questions about margins, Jassy said Amazon (NASDAQ:AMZN) will continue to invest more capital in chips, data centers, and power to pursue “this unusually large opportunity” that it has in generative AI.
Notably, Jassy said Amazon (AMZN) has not seen significant changes in customer demand or higher prices during the first half of the year due to tariffs, although he said he is unsure who will bear the cost of paying tariffs during the second half of the year when the average U.S. tariff rate increases.
Weighing in on the report, Lucas Ma, Investing Group Leader for Envision Early Retirement, said he is worried that the company’s free cash flow generation will be pressured judging by its Q2 financials in the near future. “Key rivals such as GOOG and META have just announced plans to invest more in AI infrastructure and talent. AMZN’s free cash flow is not as strong as these rivals in my view. As the AI arm race intensifies, I am afraid to see AMZN’s future capital allocation stretched,” he added.
Shares of Amazon (AMZN) were down 6.6% in postmarket trading.