Analyst downgrades Microsoft and Amazon, saying GenAI economics are “far weaker than assumed”

Amazon and Microsoft are down about 2% premarket after an analyst downgrade and amid a broader AI sell-off, as investors continue to wonder when the hyperscalers’ intense spending on AI infrastructure will pay off.

Rothschild & Co Redburn analyst Alexander Haissl downgraded both companies Tuesday to “neutral” from “buy,” breaking with many of his peers. (Over 90% of the stocks’ analysts have buy-equivalent recommendations for them, according to Bloomberg.)

The industry’s narrative that generative AI is akin to the early cloud, he wrote, is “increasingly misplaced,” saying that the underlying economics for GenAI are “far weaker than assumed.”