The US stock market has certainly struggled through the year so far. However, there is still immense hope that the tech sector will find its footing in the near future, with a turnaround expected. Among the companies slated to benefit the most is Amazon (AMZN), which is set to invest $100 billion in Amazon Web Services (AWS) in 2025.
The investment is an exciting proposition to some, and a concerning one to others. It ensures the popularity and usage rate that AWS enjoys. Moreover, it may position the business atop a thriving cloud computing sector. But it may also weigh on the company’s balance sheet in the short term. So, let’s explore what the capital expenditure means for this year.
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Amazon to Invest $100 Billion in AWS: So What Does That Mean for the Stock Now?
The struggling start to the year has continued for Amazon Thursday. The e-commerce juggernaut fell another 3% as the market was unable to continue a recovery from its worst day in four years. Yet, things are certainly not as grim as they would appear. Indeed, the long-term prospects for a host of companies like Amazon seem strong.
However, eyes are now on whether many of these businesses are in a position to navigate the falling stock price this year. Amazon (AMZN) has previously announced a $100 billion investment in AWS, so what does that mean for the stock in 2025?
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In recent years, a good predictor of Amazon’s stock success has been operating income. In early February, it reported operating income of $68.6 billion, a record. In response, the stock reached a record price of $233 that same month. Conversley, this is where things get a little worrisome in 2025.
The $100 billion in capital expenditures is slated to go toward AWS and its AI-related infrastructure. However, the financial commitment will hinder operating income. There is an expectation that it could fall as much as $1 billion, according to one report. That being said, the stock should take a small step back this year.
That certainly isn’t the whole story, as things still look increasingly bright in the long term for Amazon. It is among the most well-diversified tech stocks on the market. Moreover, down more than 20% this year already, the worst may already be behind investors. Altogether, things look to be bright in the future, even if there are some bumps in the road this year.
