Even if investors crash the stock price, the $200 billion must still be "burned," and Amazon needs to "regroup."

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Amazon is launching the largest capital expenditure plan in its history, attempting to regain momentum in the field of artificial intelligence through massive investments and defend its leading position in cloud computing. Facing strong challenges from Microsoft and Google, the tech giant is seeking to turn the tide by expanding data centers, developing chips, and building models.

According to the Financial Times, Amazon CEO Andy Jassy announced last week that the company's capital expenditure this year would rise to $200 billion, surpassing the spending levels of Google and Microsoft. The bulk of this hefty investment will be focused on computing infrastructure, with about three-quarters of the budget allocated to its cloud computing division AWS. At the same time, Jassy has not only integrated the chip, model, and advanced research teams to unify AI strategy but also cut costs by eliminating about 30,000 corporate jobs.

However, investors are uneasy about the scale of this gamble. Worried that the enormous spending will be slow to translate into returns, Amazon's stock price has dropped over 20% from its high last November. Despite facing market punishment, Jassy persists with this strategy, stating the company has deep experience in understanding AWS demand signals and converting capacity into capital returns and is full of confidence in this investment.

AWS employees reveal that the company's aggressive moves reflect internal anxiety that Amazon failed to fully capitalize on its first-mover advantage in cloud computing. Especially after OpenAI launched ChatGPT in 2022, Amazon was slower than its competitors in vying for major AI supplier contracts.

Largest Capital Expenditure in History

According to public documents, the bulk of Amazon's planned $200 billion capital expenditure will go towards AWS expansion. By comparison, Microsoft, Google, and Oracle's total spending this year are expected to approach $400 billion. Jassy stated, Amazon plans to significantly increase data center capacity this year. For 2025, the company has added nearly 4 gigawatts of capacity, equivalent to the annual energy consumption of over 3.2 million US households, and plans to double capacity by 2027.

To support this expansion, Jassy reorganized in December last year, integrating the group's chip, model, and advanced research teams under a unified leadership structure. Jassy emphasized the company will continue to operate like "the world's largest startup," maintaining a customer-centric, lean, and fast-moving state.

Competitive Anxiety Facing AWS

Although AWS generated nearly $130 billion in sales last year and contributed more than 60% of Amazon's total profit, remaining the world's largest cloud services provider, analysts predict that as demand for AI-driven cloud services soars, Microsoft's cloud business will overtake AWS within the next three years.

According to more than a dozen current and former senior employees, AWS is losing ground in bidding for enterprise AI contracts. A former AWS senior employee confessed, "We were completely unprepared for things to develop this fast."

This lag is evident in key deals. As one of OpenAI's earliest investors, Microsoft secured an exclusive cloud contract with the ChatGPT maker early on. Amazon, only after OpenAI allowed company restructuring, reached a $38 billion cloud deal with the startup last year. However, this deal pales in comparison to OpenAI's $250 billion contract with Microsoft and its $300 billion deal with Oracle. In addition, even though Amazon invested $8 billion in Anthropic and built data centers for it, that investment also came after Google had already backed the startup.

Chip Strategy and Computing Power Breakout

To reduce dependence on Nvidia products and boost profit margins, Amazon is aggressively promoting its self-developed chips. The company claims that sales of its Graviton chips for routine cloud computing and Trainium chips for AI training are expected to generate more than $10 billion in annual revenue. In December last year, Amazon launched the latest generation of Trainium chips, promising a significant performance boost.

Sources revealed to the media that Amazon is negotiating to join OpenAI's latest multi-billion dollar financing round, partly to ensure the ChatGPT maker adopts its semiconductor products. However, competition remains fierce. Google has successfully attracted Anthropic to purchase 1 million of its TPUs (Tensor Processing Units) in a deal worth tens of billions of dollars.

Ben Bajarin of technology consulting firm Creative Strategies is skeptical that leading AI startups will adopt Amazon chips. He points out that although Amazon emphasizes cost-effectiveness, some users care more about ultimate performance, even if Amazon's solution has lower operating costs than Nvidia.

Self-Developed Models Mocked as 'Amazon Basics'

On the model development front, Amazon is investing in advancing its AI model called "Nova," positioning it as a low-cost alternative to rival models. However, independent benchmark tests show Nova lags behind the most advanced models made by OpenAI, Google, Meta, and Anthropic.

According to sources, some AWS employees privately refer to Nova as "Amazon Basics," a term usually used for the group's generic, inexpensive home products, which has annoyed executives. Although the company is pushing employees to use its own AI tools, aiming for 80% of developers to use AI for coding at least once a week, several company engineers said they prefer using Anthropic's Claude model over Nova in their coding work. One AWS engineer even said bluntly, "I don't even know we're supposed to have a model."

This pressure to regain ground in the AI race weighs heavily on employees. Some worry Amazon may slip into the "day two" state founder Jeff Bezos described in 2018—meaning business stagnation followed by "excruciating decline." One senior AWS engineer said, "The culture has changed, and so has the world around us. We have to prove our worth."

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