Amazon's Two-Day Surge Exceeds 20%, Driven by AI Demand Conversion Revenue

August 4th, Amazon's stock price hit a new all-time high intraday on Monday, with a market cap exceeding $3 trillion for the first time. In the two trading days following the earnings report, the company's stock price surged over 20%, as the market reevaluated its AI infrastructure and cloud business growth potential.

The core driver of the stock price surge was the accelerated growth of its AWS business. Amazon's revenue in the second quarter grew 20% year-over-year to $200.6 billion, with AWS revenue reaching $42.2 billion, a 37% year-over-year increase, marking its fastest growth in nearly 18 quarters. Additionally, the AWS backlog increased from $364 billion in the previous quarter to $496 billion, indicating a continued expansion in AI-related cloud computing demand.

Amazon CEO Andy Jassy stated that the company's AI business and custom chip business have both surpassed $25 billion in annualized revenue. He mentioned that even with ongoing investment expansion, the compute resources by 2026 would still not be able to meet all customer demands, and the AI infrastructure demand might extend until 2028.

To meet the AI computing power demand, Amazon plans to increase its 2026 capital spending from $200 billion to $220 billion, focusing on data centers, servers, chips, and network infrastructure. Bank of America Securities projects that by 2026, total capital expenditures for cloud computing giants like Amazon, Microsoft, and Google could reach $860 billion.

However, the massive AI investment has put pressure on Amazon's short-term cash flow. As of the second quarter, the company's free cash flow for the past 12 months was -$7.6 billion. Jassy mentioned that there is a timing difference between the current investment and revenue recognition, and as the data center investments yield returns, future revenue growth is expected to outpace the growth in capital expenditures.

The market believes that the commercialization of AI is changing the valuation logic of the cloud computing industry. Apart from Amazon, Microsoft's Azure grew 43% in the second quarter, and Google Cloud grew 82%, indicating that the enterprise AI computing demand is still in the expansion phase.

Analysts point out that investors are reevaluating winners and losers among tech giants, with companies possessing cloud platforms, customer resources, and AI infrastructure capabilities likely to be the primary beneficiaries of a new AI investment cycle.