Amazon Stock Rebounds Nearly 3% After Post-Earnings Selloff as Investors Weigh AWS Surge Against AI Spending

Amazon shares rose nearly 3% in early trading Monday, recovering some ground after a post-earnings sell-off last week driven by concerns about the company's soaring spending on artificial intelligence.

Amazon stock gained $7.09, or 2.95%, to $247.44 shortly after the market opened.

Strong results, heavy spending

Amazon reported third-quarter results last week that showed strong growth in its cloud computing business, but investors focused on the company's massive capital spending.

Revenue rose 12% from a year earlier to $201.9 billion. Operating income reached $17.8 billion, with a record operating margin of 13.9%.

Amazon Web Services, the company's cloud business and its biggest profit engine, grew 39% to about $46 billion, its fastest growth in years. AWS has a contracted backlog of nearly half a trillion dollars.

But capital spending in the quarter reached about $77 billion, well above analysts' expectations. Amazon expects to spend about $220 billion this year, and CEO Andy Jassy said the company expects to "spend meaningfully more in 2027."

Earlier this year, Jassy said the company raised its 2026 spending forecast from about $200 billion largely because of higher memory chip costs.

Part of a tech sell-off

Amazon's results contributed to a broad sell-off in technology stocks on Friday, alongside a sharp drop in Intel and a historic decline in Alphabet shares the day before.

Investors have grown increasingly worried that big tech companies are spending too much on AI data centers without clear evidence of when the investments will pay off. Amazon's heavy spending has pushed its free cash flow sharply lower.

Analysts stay positive

Many analysts remain bullish. UBS raised its price target on Amazon to $352 from $348 after the report, citing the outlook for AWS.

CNBC host Jim Cramer also said investors should buy the stock after the decline, arguing that the strong AWS growth was being overlooked.

Modest gains this year

Amazon's stock has gained only about 4% this year, lagging the broader market, as investors have weighed its spending plans.

The stock trades at about 34 times trailing earnings.

AI investments

Amazon is investing heavily in AI chips, data centers, robotics and its Project Kuiper satellite internet service. The company has also made large investments in AI developer Anthropic.

Jassy has argued that strong demand for AWS and new opportunities in AI justify the spending and will deliver strong long-term returns.

Market rebound

Monday's gain came as the broader market rebounded at the open. Oil prices fell sharply on hopes for talks between the United States and Iran, and technology stocks recovered after Friday's losses.

What's next

Investors will watch whether AWS can maintain its rapid growth and whether Amazon's spending begins to translate into higher profits.

The company's next major catalysts include holiday shopping season results and further updates on its AI investments.