Amazon Increases AI Spending by 43% in Q2

Amazon.com is expected to join Google and Microsoft  in reporting a surge in capital spending on artificial intelligence as Big Tech companies rush to capitalize on the booming technology.

The e-commerce giant's capital investments - mostly for building cloud and generative AI infrastructure - is expected to have risen 43% in the second quarter to $16.41 billion, according to LSEG data. That represents a roughly $1.5 billion increase from the previous three months.

The company's Amazon Web Services (AWS) business has long dominated the cloud-computing market but it has been facing tough competition from Microsoft in recent quarters after the Windows maker rolled out AI-powered services to its Azure cloud business.

In response, Amazon has partnered with the likes of Anthropic and offered startups free credits that cover the cost of using major AI models to boost the market share of its AI platform Bedrock. It also named a new head for the AWS unit in May.

Microsoft and Google-parent Alphabet also said earlier this month they would plow ahead with investments even as the payoff from AI takes longer than some investors had hoped. This knocked Big Tech stocks whose valuations have soared this year on the promise of AI.

Amazon shares have risen about 23% this year.

Growth at AWS is likely to have stayed similar to the previous quarter at just over 17%, according to LSEG data.

As a result of the spending increase, Amazon's gross profit margin growth is expected to have slowed to 1.3% in the April-June quarter, compared with 2.6% in the previous quarter and an average of 2.7% over the past two years.

Amazon's total revenue is expected to have grown 10.6% to $148.56 billion - the slowest rise in five quarters.