Amazon.com is expected to join Google and Microsoft on Thursday in reporting a surge in capital spending on artificial intelligence as Big Tech companies rush to capitalize on the booming technology.
FILE PHOTO: Figurines with computers and smartphones are seen in front of Amazon logo in this illustration taken, February 19, 2024. REUTERS/Dado Ruvic/Illustration/File Photo
The steep spending is also expected to pressure Amazon's margins, outweighing benefits from cost cuts and supply chain efficiencies that are aiding the retail unit's profitability. Microsoft and Google-parent Alphabet also said earlier this month they would plow ahead with investments even as the payoff from AI takes longer than some investors had hoped. This knocked Big Tech stocks whose valuations have soared this year on the promise of AI.
As a result of the spending increase, Amazon's gross profit margin growth is expected to have slowed to 1.3 per cent in the April-June quarter, compared with 2.6 per cent in the previous quarter and an average of 2.7 per cent over the past two years.
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