Amazon shares have fallen about 11% from their August all-time high, pushing the stock into a technical correction. The slide follows an FTC lawsuit over advertising pricing and rising Wall Street concern about the company's expanding AI capital spending, even as one analyst says Amazon's capital discipline still beats Meta and Alphabet.
Amazon (AMZN) shares dropped 2% on Tuesday, closing below the stock's key 100-day moving average and confirming a technical correction. The stock has now fallen about 11% from its August all-time high. Amazon has also lagged the broader market this year, rising 10% compared with a 12% advance for the S&P 500.
FTC sues over advertising pricing
The pullback follows a lawsuit the Federal Trade Commission and 22 states filed on Tuesday, alleging Amazon's advertising practices overcharged its roughly 1.2 million advertisers by more than $20 billion since 2019. The FTC contends Amazon used undisclosed reserve-pricing mechanisms that raised costs for advertisers and consumers. Amazon responded that advertisers are receiving greater value from its platform.
According to Citi analyst Ronald Josey: "we would take advantage of any dislocation in shares", citing accelerating AI demand at AWS and expanding profitability.
Capex concerns weigh on the stock
Investor unease also stems from the scale of Amazon's AI spending. The company recently expanded its 2026 capital expenditures budget to approximately $220 billion, and Evercore ISI analyst Mark Mahaney now estimates 2027 capex at $320 billion and 2028 capex at $370 billion, with negative free cash flow of about $50 billion in each of those years.
Piper Sandler sees capital discipline setting Amazon apart
Even as the stock struggles, Piper Sandler reiterated an Overweight rating on Amazon with a $320 price target on August 31. The firm projects Amazon's return on invested capital to fall from about 17% in 2018-2025 to about 14% in 2026, but says that decline is far shallower than what it expects at Meta and Alphabet.
Piper estimates ROIC deterioration from 2024 to 2027 at about 27 percentage points for Meta and 26 percentage points for Alphabet, versus a smaller decline for Amazon. The firm attributes the gap to where the spending goes: Alphabet and Meta are largely funding frontier AI models, while Amazon's spending is concentrated on AWS, which posted 37% year-over-year revenue growth to $42.2 billion in the second quarter, its fastest pace in four years.
Hedge fund positioning reflects that support. Hedge fund holdings in Amazon rose to 369 at the end of the second quarter of 2026, up from 353 the prior quarter, while short interest stayed limited at about 0.97% to 1.00% of the public float. Still, Piper cautions that a projected 14% ROIC remains below Amazon's historical average, and that excess AWS capacity or pricing competition could compress it further.
Sources: Yahoo Finance, Insider Monkey
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