Amazon (AMZN) shares are in a late summer funk, and it’s getting uglier by the trading day.
Shares of the tech beast have now entered a technical correction after tanking about 11% from August’s all-time high. With the 2% decline on Tuesday, the stock finished the sessions below its key 100-day moving average per Yahoo Finance AlphaSpace data.
The stock has under-performed the S&P 500 this year, rising 10% compared to a 12% advance for the benchmark index.
Two factors may be in play driving the pullback in Amazon.
For starters, on Tuesday the Federal Trade Commission (FTC) and 22 states filed a suit alleging Amazon’s advertising practices overcharged its roughly 1.2 million advertisers by $20 billion plus from 2019 to the present.
The FTC contends it did this by way of undisclosed reserve-pricing mechanisms that ultimately increased costs for advertisers and consumers.
Amazon responded by saying advertisers are receiving greater value from its platform.
Whatever the case, investors are selling Amazon shares on the fears a lucrative profit center — advertising — for Amazon may become less lucrative in the future.
“While we recognize the concern of an FTC suit, we would take advantage of any dislocation in shares given our view that advertisers continue to allocate greater spend to Amazon based on results, that AI demand trends at AWS are accelerating, continued retail tailwinds (as Agentic Commerce rises), and expanding profitability,” said Citi analyst Ronald Josey in defense of Amazon’s stock on the news.
Lingering concerns on how much Big Tech is spending on AI infrastructure are also not helping Amazon’s stock
Recall that just a few short weeks ago Amazon announced it is significantly expanding its full-year 2026 capital expenditures budget to approximately $220 billion.
And the aggressive spending is poised to continue.
“We now estimate Amazon’s 2027 capex to be $320 billion, and its 2028 capex to be $370 billion. Accordingly, we now estimate negative free cash flow in 2027 and 2028 of approximately -$50 billion in each year,” warned EvercoreISI analyst Mark Mahaney.
Brian Sozzi is Yahoo Finance’s Executive Editor, host of the ‘Power Players With Brian Sozzi’ podcast and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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