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Amazon’s overwhelming AI demand is just a bronze medal compared to its rivals

Weak guidance for the current quarter overshadowed a strong second-quarter earnings report. Despite Amazon being the leader in cloud computing, analysts questioned its slower growth compared to competitors.

Jon Keegan

8/1/25 9:41AM

Amazon has so much demand for AI in its AWS services that it has a $195 billion backlog. Its earnings and revenue for the second quarter beat analysts’ expectations. But investors overlooked that good news to focus on a weaker-than-expected operating income forecast for the current quarter and huge spending on capital expenditures.

Like Microsoft, Amazon’s AWS cloud business benefits from any customer’s AI computing needs, and has invested heavily in meeting those needs.

Amazon is building massive clusters of data centers filled not only with Nvidia GPUs, but also many in-house custom Trainium2 chips, which CEO Andy Jassy called “the backbone for Anthropic’s newest generation cloud models.”

But Jassy was pressed on the company’s earnings call about why AWS — the leader in the market — was growing slower than its competitors. Alphabet’s cloud business grew 31% year on year, and Microsoft’s Azure business grew 39% year on year this quarter. Amazon’s AWS revenue grew 17.5% for the quarter. Jassy’s long nonanswer did not soothe investors.

And the heavy capex spending to keep pace with demand could affect profits, Brian Lisowski, Amazon’s CFO, said:

“We expect AWS operating margins to fluctuate over time, driven in part by the level of investments we are making at any point in time. We will continue to invest more capital in chips, data centers, and power to pursue this unusually large opportunity that we have in generative AI.”

Tariff uncertainty

When asked about the impact of President Trump’s chaotic tariff plans, Jassy said the company hasn’t seen diminished demand or widespread price increases, but:

“We just don’t know what’s going to happen moving forward. It’s hard to know where the tariffs are going to settle, particularly in China. It’s hard to know what will happen when we deplete some of the pre buys that we did on our own first party retail and then some of the forward deploying that we saw of our third-party selling partners. And, you know, that that could change in the second half.”

Project Kuiper vs. Starlink

In response to an analyst question about Project Kuiper, Amazon’s answer to SpaceX’s Starlink satellite internet service, Jassy said he felt the company had a good shot at being second in the space, thanks to what he says is a price and performance edge and the strong relationships the company can leverage. Jassy said:

“If you think about the three key customer segments who want low Earth orbit satellite — consumers, enterprises, and governments — we have very strong relationships with all three customer segments given our consumer businesses and our AWS business.”

Jassy also said that even though the service hadn’t launched yet, Amazon has already signed enterprise and government contracts for the service, which aims to launch a “commercial beta” by the end of the year or beginning of next year.

Jassy: “It’s so early” in AI

On the earnings call, Jassy was asked if there would be surge of growth over the next year, with the explosion of generative AI spreading everywhere.

Jassy explained that all of these AI applications don’t exactly result in steady growth going up all the time:

“If you look at what’s really happening in the space, you have — it’s, it’s very top heavy. So you have a small number of very large frontier models that are being trained that spend a lot on computing.”

Jassy said while the computation required for training is huge, that only happens every so often. Most of the AI computing time is spent for “inference” — running actual AI queries for customers.

“But in at scale, you know, 80% to 90% of the cost will be in inference because you only train periodically, but you’re spitting out predictions and inferences all the time.”

And that is where Amazon believes it will have a long-term advantage with its cheaper and more energy efficient custom chips. But time will tell if that strategy will pay off in the fast-moving world of AI.

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Nate Becker & Matt Phillips9h

Oil drops, yields fall, and stocks rise on reports the US has sent Iran a plan to end war

Oil, stock, and bond markets flipped as investors continued to digest the latest reports on a potential wind-down of the war in Iran, with The New York Times reporting that the US has sent Iran a 15-point plan to end the conflict.

Crude oil futures dropped sharply, from around $92 a barrel to about $88.50. Yields on two-year and 10-year Treasurys dropped, and the SPDR S&P 500 ETF shot up after-hours.

From the Times:

“The United States has sent Iran a 15-point plan to end the war in the Middle East, according to two officials briefed on the diplomacy, reflecting the Trump administration’s eagerness to find an offramp from the conflict as it grapples with its economic fallout.

It was unclear how widely the plan, delivered by way of Pakistan, had been shared among Iranian officials and whether Iran was likely to accept it as a basis for negotiations. Nor was it clear whether Israel, which has been bombing Iran together with the United States, was on board with the proposal.

But the delivery of the plan showed that the administration was ramping up efforts to conclude a war, now in its fourth week, that has drawn in several other countries.”

Some individual shares had outsized reactions to the news in the postmarket session. Gold miners Freeport-McMoRan and Newmont, which have been battered since the war started, rose. Ammonia maker CF Industries — which had risen on expectations of rising prices for fertilizer products linked to the closure of the Strait of Hormuz — fell.

US natural gas producers such as APA Corporation, EOG Resources, Devon Energy, and Diamondback Energy also declined after-hours.

The Times report also said that “for now, there is no indication that the war will let up imminently.”

United States Said to Have Sent Iran a Plan to End the Middle East War

Crude oil futures dropped sharply, from around $92 a barrel to about $88.50. Yields on two-year and 10-year Treasurys dropped, and the SPDR S&P 500 ETF shot up after-hours.

From the Times:

“The United States has sent Iran a 15-point plan to end the war in the Middle East, according to two officials briefed on the diplomacy, reflecting the Trump administration’s eagerness to find an offramp from the conflict as it grapples with its economic fallout.

It was unclear how widely the plan, delivered by way of Pakistan, had been shared among Iranian officials and whether Iran was likely to accept it as a basis for negotiations. Nor was it clear whether Israel, which has been bombing Iran together with the United States, was on board with the proposal.

But the delivery of the plan showed that the administration was ramping up efforts to conclude a war, now in its fourth week, that has drawn in several other countries.”

US natural gas producers such as APA Corporation, EOG Resources, Devon Energy, and Diamondback Energy also declined after-hours.

The Times report also said that “for now, there is no indication that the war will let up imminently.”

GameStop seesaws on Q4 results

The video game and collectibles retailer just reported Q4 results.

Luke Kawa, Max Knoblauch10h

Tasha Matsumoto

10h

Stocks close lower after fluctuating as traders digest war updates

Stocks pared steeper losses on hopes of US-Iran talks, but were unable to maintain gains on reports that the US is deploying 3,000 troops to the Middle East.

Matt Phillips11h

Amid Mideast conflict, investors cling to faith in the AI build-out

Data center build-out stocks showed impressive resilience to the slump that hit big indexes Tuesday.

In fact, construction companies, server system makers, fiber-optic technology stocks, and memory makers — all cornerstones of the AI trade — were having a pretty good day, suggesting the market sees the wave of AI construction continuing, war or no war.

Optical stocks seen as crucial to efficiently transmitting the flood of information AI data centers both produce and depend on were surging. Corning, Lumentum, Coherent, and Ciena Corp. ramped.

Server rack makers HP Enterprise and Dell jumped. Construction and engineering companies like Sterling Infrastructure, MasTec, and Comfort Systems USA, which have benefited from the growth in building data centers, posted solid gains.

Hard disk drive makers Seagate Technology Holdings and Western Digital were also positive, though other memory plays such as Sandisk and Micron were in the red.

It was an impressive display of positivity on a day when the S&P 500 (SPDR S&P 500 ETF) and the Nasdaq 100 (Invesco QQQ Trust) were both fluttering between positive and negative territory for completely understandable reasons.

After all, the 82nd Airborne is heading to the Middle East, suggesting the US is considering sending troops into Iran. US crude oil is back above $90 a barrel and climbing, as the Strait of Hormuz remains essentially shut.

Additionally, the problems in the private credit market continue, with major fund managers preventing investors from withdrawing all the money they would like to. We even had a weak auction for US two-year Treasury notes — investors seemed to think the offered yield might not be sufficient to offset inflation risks stirred up by the war — that sent short-term interest rates up sharply.

But apparently it will take more than all that for investors to worry that the AI build-out may be halted, delayed, or even just trimmed back.

Nate Becker15h

Stocks get a bump on CNN report that Iran is willing to listen to proposals to end war

Stocks got a small bump midday Tuesday as CNN reported on what appeared to be a softening in Iran’s position toward ending the war in the Middle East.

The S&P 500 briefly turned green following the report, before paring some of those gains in the afternoon.

From the CNN report:

“An Iranian source told CNN on Tuesday that there had been ‘outreach’ between the United States and Tehran and that Iran is willing to listen to ‘sustainable’ proposals to end the war.

‘There has been outreach between the United States and Iran, initiated by Washington, in recent days, but nothing that has reached the level of full-on negotiations,’ the source said. ‘Messages have been received through various intermediaries to scope out whether an agreement to end the war can be reached.’”

Markets had zoomed Monday as President Trump said there had been discussions between the two nations, but they gave back some of their gains after Iran starkly denied the claim. Markets seemed to read this new reporting as a softening of Iran’s position.

Iranian source says there has been US "outreach" and Tehran "willing to listen"

“An Iranian source told CNN on Tuesday that there had been ‘outreach’ between the United States and Tehran and that Iran is willing to listen to ‘sustainable’ proposals to end the war.

‘There has been outreach between the United States and Iran, initiated by Washington, in recent days, but nothing that has reached the level of full-on negotiations,’ the source said. ‘Messages have been received through various intermediaries to scope out whether an agreement to end the war can be reached.’”

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