Amazon Anticipates $105 Billion in Capital Expenditures Driven by AI Growth in 2025
Amazon CEO Andy Jassy announced a forecast of $105 billion in capital expenditures for 2025, primarily aimed at expanding AI capabilities within AWS. Constraints due to chip shortages and energy issues currently impact growth.
Amazon CEO Andy Jassy announced on Thursday that the Amazon Web Services (AWS) cloud business might grow more rapidly if not for "capacity constraints" impacting data centers. He cited difficulties in procuring AI chips, server components such as motherboards, and energy necessary for powering data centers as reasons for the shortages.
"It is true that we could be growing faster, if not for some of the constraints on capacity," Jassy mentioned during a call with analysts.
On the same day, AWS reported a 19% increase in sales for the fourth quarter, reaching $28.8 billion, slightly falling short of street estimates. Following this news, Amazon's stock dropped approximately 4% in after-hours trading, as the company provided lower-than-expected guidance for the first quarter.
Jassy's comments align with those from cloud competitors Microsoft and Google. Last week, Microsoft's CFO Amy Hood remarked that they are in "a pretty constrained capacity place" regarding demand, while Google's leadership indicated they concluded 2024 with "more (AI) demand than capacity."
Looking ahead, Jassy expects the current constraints to "relax" in the second half of 2025 and noted it is "hard to complain" given that AWS's AI business is on track to produce "multi-billion" dollars in annual sales.
Amazon envisions ongoing growth in AI demand. The company forecasts approximately $105 billion in capital expenditures for 2025, primarily directed towards data centers, after spending a record $26.3 billion in the fourth quarter.
Jassy emphasized that AWS does not commit to such substantial financial investments without "significant signals of demand." He concluded, "When AWS is expanding its capex, particularly for what we believe is a once-in-a-lifetime type of business opportunity like AI, I think it's quite a promising sign for the AWS business in the medium to long term."
