Amazon shares sunk more than 5% on Friday after the company's hefty spending forecast surprised investors who were already wary that the artificial intelligence boom is at risk of becoming a bubble.
The e-commerce company on Thursday was the latest tech giant to announce plans for a massive increase in capital expenditures, after Google parent Alphabet , Microsoft and Meta all signaled they expect their spending sprees to continue.
Amazon, Alphabet, Microsoft and Meta reported about $120 billion in capital expenditures in the fourth quarter alone. That figure could exceed more than $660 billion this year, the Financial Times reported, which is higher than the gross domestic product of countries like the United Arab Emirates, Singapore and Israel.
Wall Street has responded differently to the companies' spending plans, cheering Meta and Alphabet's forecasts, while punishing Amazon and Microsoft.
Amazon, Microsoft, Nvidia , Meta, Google and Oracle collectively lost more than $1 trillion from their valuations over the past week, according to FactSet data. Amazon shed just over $300 billion from its market cap, the most out of the group.
Shares of companies developing hardware for the AI build-out will likely face continued volatility as "sentiment contagion takes hold," Paul Markham, investment director at GAM Investments, told CNBC.
"Questions over the extent of capex as a result of LLM build-outs, the eventual return on that, and the fear of eventual over-expansion of capacity will be persistent," he added.