Amazon's shares surged, on track to add about $300 billion in market value, after its cloud computing unit, Amazon Web Services (AWS), reported a 37% revenue jump in the second quarter, beating analyst estimates. This marked Amazon's strongest cloud growth in over four years, reinforcing investor confidence in its substantial AI investments. The company boosted its full-year capital expenditure forecast to $220 billion, up from $200 billion, with CEO Andy Jassy stating that most of this spending is directed towards AI and serving existing demand, with much of its 2027 and some 2028 capacity already reserved.
Microsoft also saw a positive reception, adding nearly $450 billion to its valuation, the largest single bump for any company in history, after reporting its fastest cloud growth in four years. Other major tech companies, including Alphabet and Meta Platforms, also increased or reiterated their capital spending plans. Alphabet raised its 2026 capital expenditure outlook to $195 billion-$205 billion, up from $190 billion, while Meta increased the low end of its guidance for capital expenditures, committing to almost $700 billion in future spending. This collective increase in AI spending by hyperscalers is bolstering the outlook for computing and networking chipmakers.
This robust spending by tech giants is providing a lifeline to the chip sector, which had recently faced concerns about a potential spending slowdown. Companies like Samsung Electronics, SK Hynix, Intel, Nvidia, Micron Technology, and AMD, which had experienced slumps, saw a rebound in their shares. For example, Micron Technology shares rose 18.4% and AMD shares climbed 13%. While analysts believe this will stabilize sentiment for semiconductor stocks, some express caution about whether it will lead to a large upside, as investors are increasingly looking for clear returns on these massive AI investments. Free cash flow for Amazon, Alphabet, and Meta, for instance, turned negative or declined due to the increased capital expenditures, with Amazon burning $7.6 billion on a trailing 12-month basis.
