Amazon pours fuel on Big Tech spending after DeepSeek panic

While reporting its fourth-quarter results Thursday afternoon, Amazon became the latest tech giant to project a major jump in capital spending for this year—even after a big surge last year. Amazon didn’t give a precise forecast but said the $26.3 billion of capital spending in the latest quarter was a run rate that will be “reasonably representative" of what the company will spend this year.

That would equate to about $105 billion for the year, up 35% from last year’s total and far above the $86 billion analysts were expecting, according to consensus estimates from Visible Alpha. And because Amazon defines its capital spending as cash expenditures and equipment acquired under finance leases, net of proceeds from the sale of property and equipment, the actual money flowing out the door will likely be higher. Purchases of property and equipment from the company’s cash flow statement—the traditional definition of capex—totaled $27.8 billion in the fourth quarter.

In any case, it is definitely a big number. Google parent Alphabet used its own report earlier this week to announce plans to spend $75 billion in 2025, after shelling out about $52.5 billion last year. And two weeks ago, Meta Chief Executive Mark Zuckerberg said the Facebook parent would part with as much as $65 billion this year following an outlay of $39.2 billion in 2024. Microsoft’s quarterly report last week has analysts now expecting total capital spending of nearly $94 billion this year, according to consensus estimates from Visible Alpha. And that is after the software titan boosted its spending by 83% in 2024.

The spending projections emerging from Big Tech’s recent slew of earnings reports are particularly notable given the recent revelations from a Chinese AI startup called DeepSeek, which claims to have made technical breakthroughs that allow for the training of advanced AI models at a fraction of the computing cost required by U.S. competitors. That sparked a marketwide selloff that hit AI chip designers like Nvidia particularly hard, on the assumption DeepSeek’s breakthroughs would eventually clip demand for the expensive computing systems required to power AI services.

Amazon doesn’t seem to agree. “I think one of the interesting things over the last couple of weeks is, sometimes people make assumptions that if you’re able to decrease the cost of any type of technology component, in this case, we’re really talking about inference, that somehow it’s going to lead to less total spend in technology," Chief Executive Andy Jassy said on the company’s earnings call Thursday. “And we have never seen that to be the case."

Big Tech’s big spending plans are great news for Nvidia, whose stock is still down nearly 13% from the DeepSeek selloff. Raymond James chip analyst Srini Pajjuri said “we are not overly concerned about a potential spending pause" in a note Thursday following Amazon’s results.

But this splurge may also fuel more worries from investors about the eventual payoff of such nosebleed levels of investment. Amazon’s shares fell more than 4% in after-hours trading Thursday, as the raised capex targets came even as the company’s projection for revenue and operating earnings in the first quarter fell below Wall Street’s estimates.

Jassy said on the call that Amazon doesn’t procure data center hardware and chips “unless we see significant signals of demand." He thus framed Amazon’s massive outlay as a good sign for its AWS cloud computing business, which is generating more than $107 billion in revenue a year now and expected to surpass $150 billion in 2026, according to current FactSet estimates. Even at the Everything Store, you have to spend money to make money.

Write to Dan Gallagher at dan.gallagher@wsj.com