After Microsoft, Amazon becomes the second of the "Big Seven" to enter a bear market. The next could be this company.

This week, market concerns over excessive AI spending continue to linger. Investors are strongly resisting the aggressive artificial intelligence investment plans of tech giants, leading to significant declines in the stocks of the “Big Seven.” Amazon’s stock has been falling for nine consecutive trading days, the longest streak since 2006, officially entering a technical bear market, defined as a drop of 20% or more from a key high. On Friday, the stock further fell below $200, nearly 23% below the $254 closing price on November 3, its 52-week high.

As a result, Amazon has become the second member of the “Big Seven” tech giants to enter a bear market after Microsoft. Microsoft’s stock entered a bear market on January 29, following a disappointing Azure cloud growth report the previous day. As of this week’s close, Microsoft’s stock has fallen more than 25% from its $542.07 52-week high on October 28.

Amazon’s massive AI investment plans have not been well received by investors. Although doubts about Amazon’s AI strategy and cloud growth pace have existed since last year, the company continues to double down on this direction. Among the four major cloud service giants, Amazon, Microsoft, Meta, and Google are expected to spend a combined $650 billion on AI capital expenditures by 2026, with Amazon planning to spend $200 billion, ranking first among global cloud service providers.

This unexpectedly high capital expenditure surprised investors and overshadowed Amazon Web Services’ (AWS) impressive 24% growth in the fourth quarter. Wall Street analysts are concerned that such large-scale investments could make Amazon the first cloud giant to have negative free cash flow.

On Tuesday, investors received more details about Amazon’s AI investments: semiconductor company Astera Labs (ALAB) disclosed in its earnings report that it has entered into a multi-year agreement worth $6.5 billion with Amazon to provide semiconductor connectivity solutions for the cloud provider.

Some analysts believe that the market’s pessimism toward Amazon is overdone. Deutsche Bank analyst Lee Hollwitz wrote in a report last week, “Amazon is not becoming more capital-intensive; rather, it is making early investments in future cloud computing capacity to drive digital transformation.” Hollwitz believes that the risk of underinvestment for Amazon is much greater than that of overinvestment. Even if the investments exceed actual needs, the company can gradually absorb the capacity over time. He has a target price of $290 for Amazon stock.

William Blair analyst Dylan Carden acknowledged that increasing capital expenditure carries risks, and until Amazon shows clearer signs of accelerating AWS revenue or improving profitability, its stock may remain under pressure. However, he also sees increased investment as reflecting Amazon’s “inherent advantage in transforming existing AWS infrastructure,” meaning its capacity deployment will be faster than peers.

Amazon also has heavyweight supporters on Wall Street. On Wednesday, Bill Ackman’s Pershing Square Capital disclosed holdings in Amazon and Meta, with these positions accounting for 13% and 10% of the fund’s capital, respectively, as of the end of 2025. According to Pershing Square’s 2026 investor report, the fund entered Amazon in April 2025 at an “attractive valuation,” when the stock touched a 52-week low of $161.38. “AWS is a leading cloud service provider in a highly concentrated market. We expect the company’s data center capacity to double by 2027, with the expansion driven by the growing demand for AI inference compute power.”

Pressure shifts to Nvidia

Recent market performance shows that tech giants’ stocks have been hit by concerns over excessive AI investments. Apex Fintech Solutions’ Vice President of Risk, Mike Tracey, stated that the recent sell-off highlights increasing divergence within the “Big Seven” tech stocks.

A First Financial reporter noted that worries over AI investments have persisted for months. After Meta raised its capital expenditure expectations during its Q3 earnings call last October, its stock plummeted and entered a bear market on November 4. Meta’s stock rose from a low of $589.15 on November 20 to a high of $738.31 on January 29, a 25.3% increase, but has since retreated, closing nearly 19% below its August peak as of Friday, approaching the bull-bear threshold again, potentially making it the next “Big Seven” to enter a bear market.

Tracey said that since this decline, investors have begun to withdraw from OpenAI-related concepts tied to Microsoft, Nvidia, and Oracle, amid rising concerns over their refinancing deals; they are now favoring Google and Broadcom ecosystems. He added that Google’s vertically integrated technology system has buffered some concerns about overinvestment, helping its stock avoid the most severe tech sell-off. As of the close, Google’s stock has fallen 10.3% from its $343.69 close on February 2. “I believe Google’s TPU (Tensor Processing Unit) self-sufficiency should command a valuation premium over other companies that might be impacted by chain disruptions.”

In contrast, Amazon, Microsoft, and Meta have seen more severe declines, as investors lack confidence that their AI investments will generate sufficient returns. For Amazon, the significant increase in capital expenditure could reverse its free cash flow this year, implying it may need to raise funds through debt.

Despite recent sharp declines, current market conditions are still better than during the last downturn—last April, tariff fears triggered a sell-off that intensified market crashes, with all “Big Seven” stocks entering bear markets. The Roundhill Seven Big Tech ETF (MAGS) hit a low of $40.50 on April 8, 2025, down 30.5% from its peak of $58.24 on December 17, 2024. As of Friday, the ETF’s closing price was $69.06, down 12% from its October 29, 2023, high of $69.06.

Tracey believes that the next key catalyst for the AI sector will be Nvidia’s earnings report on February 25. The results will reveal whether the AI boom is cooling off and whether Nvidia can successfully deliver substantial returns on its major customer investments.