During AWS re:Invent 2024, held at The Venetian in Las Vegas on December 3, Amazon’s CEO, Andy Jassy, took to the stage for his keynote address. The event, hosted by Amazon Web Services, spotlighted the company’s plans, with a substantial announcement regarding future spending.
Amazon announced on Thursday that it’s setting a hefty goal to boost its capital expenditures to $100 billion in 2025. This increase aligns with their ongoing investments in artificial intelligence. This planned budget surpasses last year’s spending, which hovered around $83 billion. Back in October, Andy Jassy had hinted that capital spending would rise, with the growth in generative AI being a main driver.
During a call following the release of the fourth-quarter earnings, Jassy noted, “We spent $26.3 billion on capex in the fourth quarter, and that’s pretty much what you might expect as an annualized rate for 2025.” Most of this investment is aimed at AI for Amazon Web Services.
The company is rapidly expanding its infrastructure, pouring resources into data centers, network equipment, and hardware to cater to the surging demand for generative AI, which gained significant traction after OpenAI launched ChatGPT in late 2022. Amazon is actively releasing new AI products, including a series of Nova models, Trainium chips, a shopping chatbot, and a marketplace dubbed Bedrock for third-party AI models.
Amazon isn’t alone in this hefty investment. Over at Google, Alphabet anticipated spending about $75 billion on capital expenditures this year. Microsoft has declared plans to put in $80 billion towards the development of data centers to support AI activities by fiscal 2025. Meanwhile, Meta announced an investment of up to $65 billion for enhancing data center and computing infrastructure.
While Amazon shared its ambitious spending trajectory, it also reported mixed results for the fourth quarter. There was hesitancy in their sales projections for the upcoming period, overshadowing their successes in the fourth quarter’s revenue and profits, causing shares to dip over 4% in after-hours trading.
In his conversation with investors, Jassy emphasized the potential value of this investment, describing it as a “once-in-a-lifetime type of business opportunity.” He reassured them that this capital venture into AI would be beneficial not only for the business but also for customers and shareholders in the medium to long term. Additionally, some of this year’s capital will focus on their retail operations, with intentions to enhance delivery speed and efficiency.
Nevertheless, tech companies are now confronting increased scrutiny over their AI expenditures, especially after the recent emergence of the Chinese startup, DeepSeek. The lab proudly announced it developed its R1 model, which it claims rivals OpenAI’s leading model, with just two months and a budget under $6 million. This revelation sent shockwaves through the market, hitting semiconductor giants like Nvidia and Broadcom hard, with their combined market capitalization plummeting by approximately $800 billion.
In related content, there’s a video featuring insights into Amazon’s long-term strategies, noting robotics as a key driver for the company, as discussed by T. Rowe Price’s Wang.
