Amazon's $104 Billion AI Bet Isn't Paying Off--Yet. Here's Why That Could Change Fast

Amazon AMZN is pouring unprecedented resources into artificial intelligence, with capital expenditures projected to hit $104 billion this yearmore than any other company in the S&P 500 (SPY). This spending spans data centers, warehouse automation, and robotics, underscoring management's belief that AI could reshape both its retail and cloud operations. Yet, despite these aggressive investments, the stock has gained only about 3% year-to-date, underperforming peers like Meta META and Nvidia NVDA. According to Brian Recht, portfolio manager at Janus Henderson, investors are waiting for tangible proof that AI can drive improved profitability, though he believes the benefits could become more visible in the coming quarters.

Analysts see Amazon Web Services as a key growth driver as generative AI adoption accelerates, but the retail division may hold equally strong potential. Amazon is using AI to optimize logistics, refine ad targeting, and enhance product recommendations, while also rolling out its Rufus chatbot to improve customer experiences. Robotics is emerging as another major opportunity: Amazon is developing humanoid robots to automate delivery processes, a move that Bank of America estimates could unlock over $7 billion in annual savings by 2032. Morgan Stanley has noted that Amazon's retail operations could be one of the most underappreciated beneficiaries of generative AI, given the thin margins that make efficiency gains especially valuable.

Looking ahead to its July 31 earnings report, Amazon is expected to post earnings per share of $1.32 on revenue of $162 billion, reflecting a 4% and 9% year-over-year increase, respectively. These figures remain below the average growth expected from the Magnificent Seven, which Bloomberg Intelligence pegs at 15% for earnings and 12% for revenue. CEO Andy Jassy has signaled a longer-term vision, emphasizing AI-driven workforce reductions and logistics automation as levers for profitability. Irene Tunkel, chief US equities strategist at BCA Research, suggests that the real impact of AI and robotics on Amazon's retail margins may unfold over the next five to ten years, giving the company a potential edge as the technology matures.