Amazon’s aggressive push into artificial intelligence is raising investor concerns over soaring capital spending, but analysts argue the strategy is aligned with surging cloud demand.
As the company ramps up data center investments, metrics like backlog growth and improving productivity suggest the long-term payoff could outweigh near-term pressure on margins.
AI spending concerns weigh on sentiment
Amazon is ramping up its artificial intelligence investments at a pace that has unsettled some investors, even as analysts argue the spending is necessary to meet surging demand.
The company plans to allocate as much as $200 billion this year toward AI-related capital expenditures, potentially making it the largest spender among Big Tech peers.
The scale of that investment has raised concerns that Amazon is committing billions to data center expansion without immediate returns.
Shares of Amazon have fallen about 8% since the start of the year, reflecting investor unease over rising costs and uncertain near-term payoffs.
However, BNP Paribas analyst Nick Jones pushed back on those concerns, stating that Amazon’s heightened spending is “appropriate and necessary given demand levels and the size of the future opportunity,” and reiterating an outperform rating with a $320 price target.
Backlog growth signals future monetisation
Jones argues that investor concerns may be misplaced, pointing to Amazon’s backlog-to-capex ratio as a more relevant metric than headline spending levels.
Amazon and other hyperscalers, including Alphabet, are expanding data center capacity in line with rising contracted demand.
According to Jones, the company’s backlog has accelerated in recent quarters, suggesting strong visibility into future revenue.
“Concerns are overdone,” the analyst said, emphasizing that infrastructure investments are closely tied to demand already in place.
He estimates that each gigawatt of data center capacity costs around $50 billion to build but can generate approximately $15 billion in annual revenue once operational.
With a robust backlog, Amazon is expected to convert capacity into revenue quickly as new infrastructure comes online.
Jones also noted that these projections could be conservative. Amazon may benefit from volume discounts in construction and deploy AI across its own ecosystem, boosting returns beyond its external cloud services business.
Valuation appeal and AI-driven productivity gains
Beyond infrastructure investments, Amazon is also seeing improvements in operational efficiency.
Revenue per employee has increased significantly, rising from under $300,000 in the first quarter of 2022 to more than $540,000 in the fourth quarter of 2025, according to BNP Paribas estimates.
Jones views this as evidence of productivity gains driven by AI adoption, with companies increasingly replacing physical labor with digital processes.
Separately, Ari Sass, president of M.D. Sass highlighted Amazon as an attractive opportunity despite broader caution around large technology stocks.
“We are not just buying cheap stocks and hoping for mean reversion. Those days are over,” Sass said. “We are looking for strong business fundamentals and reasonable valuations.”
Sass pointed to Amazon’s dominant position in both retail and cloud computing through Amazon Web Services, as well as its investments in AI, including an $8 billion stake in Anthropic.
He also noted that Amazon’s valuation has become more appealing. The stock is currently trading at around 22 times estimated 2027 earnings, compared with a five-year average forward price-to-earnings ratio of 40 and a peak above 70.
As Amazon continues to scale its AI capabilities and cloud infrastructure, analysts suggest that the company’s aggressive spending could ultimately position it to capitalise on long-term growth opportunities, even if near-term investor concerns persist.
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