Amazon shares experienced a significant pullback, entering technical correction territory after a 2% decline on Tuesday that pushed the stock below its 100-day moving average, according to Yahoo Finance data. The shares had declined approximately 11% from an all-time high reached in August. For the year, Amazon stock had risen 10%, underperforming the S&P 500 benchmark index, which advanced 12% in the same period.
Two primary factors appeared to weigh on investor sentiment regarding the technology company. The Federal Trade Commission, along with 22 state attorneys general, filed suit against Amazon alleging that its advertising practices had resulted in overcharges to approximately 1.2 million advertisers totaling $20 billion or more dating back to 2019. The complaint centered on undisclosed reserve-pricing mechanisms that the FTC argued inflated costs for advertisers and consumers. Amazon countered that advertisers realized greater value from its advertising platform.
The legal action raised investor concerns that advertising, a significant and growing profit driver for the company, could face reduced margins or profitability if the allegations resulted in enforcement action or required business practice changes. Some analysts, however, viewed the development as an opportunity. Citi analyst Ronald Josey noted that despite recognizing the regulatory concern, he believed the stock dislocation presented a buying opportunity given continued advertiser spending growth, acceleration in artificial intelligence demand at Amazon’s cloud services division, and expanding overall company profitability.
A second headwind for the stock involved capital expenditure concerns across the technology sector. Amazon had recently announced significantly expanded full-year capital expenditure guidance of approximately $220 billion for 2026. Analysts projected even steeper spending in subsequent years, with EvercoreISI analyst Mark Mahaney estimating 2027 capital expenditures of $320 billion and 2028 spending of $370 billion. These projections prompted warnings of negative free cash flow of approximately $50 billion in each of those years, reflecting the substantial infrastructure investments required to support artificial intelligence development and deployment.
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