Amazon to spend $200bn on AI expansion as big tech doubles down

Amazon has become the latest US tech giant to dramatically ramp up its spending on artificial intelligence, signalling just how central AI has become to the future plans of Big Tech.

Reporting its annual financial results on Thursday, Amazon said it expects to spend around $200 billion (£147.7 billion) this year on expanding its business, with most of that investment directed towards AI. That marks a sharp jump from the $125 billion the company spent last year.

The announcement, however, did not go down well with investors. Amazon’s shares fell by more than 11 per cent in after-hours trading, reflecting growing market unease over the rising cost of AI ambitions.

Amazon Chief Executive Andy Jassy made it clear during a call with analysts that AI is the main focus of the company’s spending plans. While Amazon mentioned investments in chips, robotics and low Earth orbit satellites, Jassy said AI would reinvent almost every part of the business.

“It’s an unusual opportunity,” Jassy said, adding that he believes AI will eventually become highly profitable. “Every customer experience we have today will be reinvented by AI.”

Amazon Chief Financial Officer Brian Olsavsky noted that the company is also cutting costs elsewhere. Last week, Amazon laid off another 16,000 workers, following 14,000 job cuts announced in October.

Amazon’s move comes as other tech giants also plan record AI spending. Meta Chief Executive Mark Zuckerberg said the company could spend up to $135 billion this year on AI infrastructure, nearly double last year’s figure. Google's Chief Executive Sundar Pichai said his company would spend even more, with capital expenditure to rise to about $185 billion.

While no figure has reportedly been given by the company, they have already invested over $72 billion in AI-related talent and infrastructure.

Despite the rise in revenues, however, investors are demanding better returns on these expensive AI projects. Shares across the tech sector have dipped in recent days, with the S&P 500 falling more than 1% on Thursday, extending losses from last month’s record high.