Amazon stock falls into the danger zone after FTC lawsuit and heavy AI spending concerns
Key Takeaways
- •Amazon stock is down about 11% from its August all-time high and has fallen below its 100-day moving average.
- •The stock has gained 10% year to date, compared with a 12% rise for the S&P 500.
- •The FTC and 22 states filed a lawsuit alleging Amazon overcharged about 1.2 million advertisers by $20 billion since 2019.
- •Amazon says advertisers are getting greater value from its platform.
- •Amazon raised its full-year 2026 capital expenditures budget to roughly $220 billion, intensifying investor concerns about AI spending and free cash flow.
Amazon stock falls into the danger zone after FTC lawsuit and heavy AI spending concerns
AMZN -1.87%
^GSPC -0.71%
Amazon (AMZN) shares are in a late-summer funk, and the decline is deepening.
The stock has fallen about 11% from August’s all-time high. Following Tuesday’s 2% drop, shares closed below their key 100-day moving average, according to Yahoo Finance AlphaSpace data.
Amazon has also lagged the S&P 500 (^GSPC) this year. The stock is up 10% year to date, compared with a 12% gain for the benchmark index.
Two developments may be contributing to the sell-off.
First, on Tuesday, the Federal Trade Commission (FTC) and 22 states filed a lawsuit alleging that Amazon’s advertising practices overcharged its roughly 1.2 million advertisers by $20 billion from 2019 to the present.
The FTC said the alleged overcharges stemmed from undisclosed reserve-pricing mechanisms that increased costs for advertisers and, ultimately, consumers.
Amazon said advertisers are receiving greater value from its platform.
Investors appear to be concerned that advertising, one of Amazon’s most profitable businesses, could become less lucrative in the future. That matters because the ad business has become an increasingly important earnings driver alongside retail and AWS, so any regulatory pressure there can ripple beyond one revenue line.
Citi analyst Ronald Josey defended the stock in a note following the news.
"While we recognize the concern of an FTC suit, we would take advantage of any dislocation in shares given our view that advertisers continue to allocate greater spend to Amazon based on results, that AI demand trends at AWS are accelerating, continued retail tailwinds (as Agentic Commerce rises), and expanding profitability," Josey said.
Broader worries about Big Tech spending on AI infrastructure are also weighing on Amazon.
A few weeks ago, Amazon announced it was significantly increasing its full-year 2026 capital expenditures budget to approximately $220 billion.
That figure feeds into a wider market debate over whether the biggest cloud and platform companies can keep funding AI buildouts while preserving free cash flow, especially as investors look for evidence that the spending will translate into sustained demand at AWS and across Amazon’s services.
Analyst Mark Mahaney of Evercore ISI said the spending trend may continue at a steep pace.
"We now estimate Amazon's 2027 capex to be $320 billion, and its 2028 capex to be $370 billion. Accordingly, we now estimate negative free cash flow in 2027 and 2028 of approximately -$50 billion in each year," Mahaney warned.
Brian Sozzi is Yahoo Finance's Executive Editor, host of the 'Power Players With Brian Sozzi' podcast and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
