$AMZN · Parkev Tatevosian, CFA · 2026-11-06

I think the main reason so many investors are talking about Amazon stock is the amount of money the company is spending on artificial intelligence , as they updated their 2026 proposal to $225 billion, and told investors they expect to spend significantly more next year.

So, with this huge spending on artificial intelligence, investors are asking questions about what the return on that investment will be? Will you get your money back? Will it be worthwhile?

What are the risks? Can you slow down the pace? How long will your cash flow remain negative?

These are all legitimate concerns that I, too, raise as a shareholder in Amazon. One of the things I found positive from the Amazon management team was this statement by CEO Andy Jassey: "We continue to accelerate the pace of our capital expenditure recovery."

This means the time it takes Amazon to recoup the money it spends on capital expenditures, which go primarily to data centers.

Previously, it might have taken 5 years to recoup the money from an investment in a data center , but they have reduced that to two, three, or one and a half years. The faster the money is recovered, the lower the risk of these investments, because at least they are guaranteed to recover the money they invest, and anything extra after that is considered a pure gain.

Since Amazon has contracts and orders, and if these orders extend over several years, the management team can do the math and say, "Okay, we're going to spend $100 billion , and we have $150 billion in orders that extend over several years."

At that point, building this data center becomes an obvious decision that requires no thought.

And so, specifically, item by item and data center by data center, they make these decisions and move forward with those investments. They went on to say that they are now more convinced than ever that their investment in Amazon Web Services (AWS) will generate revenue and free cash flow far greater than they could have imagined two years ago .

So, it's better than they expected. They entered this cycle of investment in artificial intelligence believing that they would get a certain amount of revenue, a certain amount of cash flow, and a certain amount of profit; As they progressed and monitored the market, they now believe that things will be better than they initially thought.

This is great news. I like to hear this kind of development from the management team because often you don't get such developments from management teams.

But Amazon stock investors are receiving positive news. We hear from the management team coming back to us saying, "Look, we invested these hundreds of billions of dollars thinking we'd get a certain amount of results.

And it turns out the results are better than we expected."

I think investors have forgotten another driving force Amazon was benefiting from before the AI boom, which was the shift from on-premises computing to cloud computing, right? And the CEO reminded investors of this, saying, "It's important to remember that the vast majority of global IT, about 85%, is still on-premises."

We are in a cycle that will last from 10 to 20 years in which this equation will be reversed in favor of the cloud.

Thus, this is another trend, a contributing factor that boosts the revenues of Amazon's AWS division, and another justification for building these data centers, because part of the demand for these centers is not entirely related to artificial intelligence.

Part of it goes back to the global IT move to the cloud, which is the primary driver of this sector, which had already been growing for Amazon for more than a decade before the AI boom.