Key Points
Amazon (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT) have both experienced stock declines of approximately 20% from recent highs due to concerns over AI spending. As of now, Amazon’s stock trades at a price-to-earnings (P/E) ratio of 28.5, while Microsoft’s stands at 24, marking the first time in years both companies are trading below a P/E of 30.
Amazon plans to invest $200 billion in capital expenditures by 2026, affecting its free cash flow in the short term; however, AWS, which recorded $129 billion in sales in 2025 with a year-over-year growth of 24%, is expected to drive significant revenue in the long run. Meanwhile, Microsoft’s Azure revenue surged by 39% year-over-year in the last quarter, driven by its collaboration with OpenAI and a broader investment framework projected to reach $150 billion by 2026. The Intelligent Cloud division generated $32.9 billion last quarter, while the productivity and business segment netted $34.1 billion, reflecting strong diversification and growth capabilities.
