Amazon (AMZN) didn’t hold back during Thursday’s earnings call, unveiling a capital spending program that stunned investors. The e-commerce and cloud computing giant not only reported stronger-than-expected quarterly earnings but also delivered 10% year-over-year sales growth—right in line with analyst projections.

But the real headline was Amazon’s AI investment plans. In the most recent quarter, Amazon spent a staggering $26.3 billion on capital expenditures, signaling an intent to maintain that pace. That translates to more than $100 billion in annual capex, with the bulk of it dedicated to AI infrastructure.

Amazon is doubling down on a trend sweeping through the mega-cap tech world, where hyperscalers are making massive AI infrastructure bets. Meta Platforms (META) has committed $65 billion to capex, Microsoft (MSFT) $85 billion, and Alphabet (GOOGL) $75 billion. These investments are so significant that, according to BlackRock, the Magnificent 7’s capital expenditures now surpass the US government’s R&D spending.

Amazon’s stock, along with the rest of the Magnificent 7—has delivered outstanding performance in recent years. But will shareholders embrace this unprecedented spending spree, or will concerns about capital allocation start to weigh on the stock? Let’s dive into the implications of Amazon’s AI gamble.

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How Will this Affect AMZN, GOOGL, MSFT and META Stock?

For the record, I’m a firm believer in the AI boom and its transformative potential. I was an early adopter of large language models (LLMs) and continue to use them regularly across multiple domains. Not only are these tools bafflingly useful, but they are also improving almost weekly. For those still skeptical, just look at OpenAI’s recent release of ‘Deep Research’, a specialized AI model capable of conducting multi-step, high-level analysis.

I bring this up because my outlook on Amazon and the broader Magnificent 7 may seem counterintuitive given my enthusiasm for AI. I do believe that this massive capex push will ultimately generate significant returns, but the path there won’t be easy—especially for shareholders in the near term. Spending $100 billion annually is a staggering number, and it may not be immediately clear how this will translate into higher profitability in the near term.

Amazon, Alphabet, Microsoft, and Meta Platforms have been market leaders, generating strong returns over the past two years. But this new spending wave raises a critical question: will Wall Street reward or punish these companies for prioritizing AI infrastructure over immediate earnings growth?

For concerned investors, there appears to be some downside protection as well. These AI and cloud investments, while expensive, still align with the core business models of Amazon, Microsoft, Alphabet, and Meta Platforms—all of which rely heavily on cloud computing, digital, and AI-driven services. Even in a worst-case scenario where AI doesn’t revolutionize their businesses as expected, these companies will still emerge with significantly expanded data center capacity.

It is also worth noting that these investments, as large as they seem, represent roughly one year’s worth of profits for these companies. That’s a testament to the insane cash flow generation of mega-cap tech. They are spending aggressively because they can—and because they believe it will pay off.

The bottom line? Amazon, Microsoft, Alphabet, and Meta are making a long-term bet that could reshape their futures—but the near-term stock reaction may be choppy. Investors should be prepared for volatility, but history suggests that those who stay the course with these tech giants often reap the rewards.

What Stocks Can Investor Buy Instead? (MRVL and AVGO)

Two stocks that have been on my radar as huge beneficiaries of the ongoing AI investment boom are Marvell Technology (MRVL) and Broadcom (AVGO). While Nvidia dominates the AI hardware narrative, considerable spending from big tech will also flow into complementary AI solutions—particularly custom application-specific integrated circuits (ASICs) designed by Marvell and Broadcom. These ASICs don’t compete directly with GPUs but instead allow hyperscalers to broaden their AI capabilities, optimizing costs, efficiency, and performance for specialized workloads.

Marvell has secured a major partnership with AWS, supplying custom AI chips that enhance efficiency and reduce reliance on GPUs in hyperscale data centers. Meanwhile, Broadcom has deepened its relationship with Apple, providing custom AI and networking chips as Apple expands its AI capabilities. Both companies are key players in the shift toward specialized AI hardware, enabling hyperscalers and tech giants to build more efficient, scalable AI infrastructure.

Both stocks also hold Zacks Rank #2 (Buy) ratings, reflecting upward-trending earnings revisions as AI spending accelerates. Furthermore, they have been two of the best performing semiconductor stocks in the sector. This relative strength gives me further confidence in their leadership.

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AI Stock Opportunities Going Forward

Amazon’s $100 billion AI investment along with the rest of the hyperscalers is a bold, high stakes bet that will take years to fully materialize. While the long-term payoff could be massive, the near-term stock reaction may be uncertain as investors digest the impact of such aggressive spending. History has shown that big tech’s willingness to invest ahead of the curve often pays off, but shareholders will need patience.

For investors looking to dampen the effects of near-term uncertainties of this shift, Marvell Technologies and Broadcom may offer an opportunity to benefit from the ongoing AI infrastructure buildout.

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