Amazon fell after the report due to AI costs, but demand for chips sent the stock back to the upside

Quotes Amazon returned to the green zone after a short-term drawdown due to concerns about a multiple reduction in the company's cash flow amid increased costs in the competitive race in the field of artificial intelligence. Quotes were supported by data on high demand for Amazon's AI chips and a record jump in revenues of its cloud division in recent years.

Amazon shares fell more than 3% in New York trading in the first minutes after the release of its quarterly report, even though the growth rate of sales of its AWS cloud business, which accounts for more than half of the tech giant's operating profit, was a record since the second quarter of 2022 and exceeded Wall Street's expectations. According to Barron's, the negative market reaction was triggered by a 22-fold reduction in free cash flow - from $25.9 billion to $1.2 billion in annualized terms, which Amazon attributed to the growing costs of artificial intelligence.

However, during a conference call with analysts, top management managed to reverse the negative trend. Amazon CEO Andy Jassy said that the volume of contracted revenue from the use of Trainium's proprietary AI chips exceeded $225 billion. This "signal of strong demand encouraged investors," Barron's writes. Additional reason for optimism was given by Bloomberg's publication that AI startup Anthropic, whose shareholder is Amazon, is preparing a new round of fundraising at a valuation of more than $900 billion. This is almost 2.5 times higher than at the last investment in February, the agency writes.

As a result, Amazon shares recovered from the decline and ended the postmarket on April 29 in the plus by 2.8%. On April 30, at the premarket, the quotes were adding 1.5%.

On April 29, Switzerland's largest bank UBS reiterated a buy recommendation on Amazon shares and a target price of $304. This target implies a potential upside of 15% from the last closing level.

According to FactSet, the company's consensus rating for the last three months is also at the Buy level - no analyst advises to dump the securities of one of the leaders of the cloud services market. The average target price of $283.5 per share, calculated by the service, implies an 8% growth in quotations over the next year.

Since the beginning of 2026, Amazon's shares have risen 14%, one of the best returns among the "Magnificent Seven" US tech giants, Reuters points out. Now the corporation is doing its best to convince investors of the rapid payback of its AI costs, the agency notes.

In the online retail segment, Amazon is investing in expanding its day delivery geography to more medium and small cities, and shifting its focus to food delivery to increase competition with supermarket chains such as Walmart and Kroger.

Amazon is making corporate staff cuts across a wide range of positions, including laying off 16,000 employees since January. However, total headcount is down by only 1,000 compared to the end of last year, according to Reuters.

This article was AI-translated and verified by a human editor