Amazon ramps up AI spending amid Decart talks and rising risks

what happened

According to TradingView, Amazon.com, Inc. (NASDAQ:AMZN) is reportedly negotiating to acquire AI startup Decart for about $7 billion. Decart develops the real-time video model Lucy and Oasis simulated environments for training robotics and autonomous-driving systems. AWS generated $42.2 billion in second-quarter revenue, up 37% year over year, while operating income reached $16.6 billion and the margin was about 39.3%. Amazon’s trailing-12-month free-cash-flow outflow was $7.6 billion, linked to AI data-center investment.

Amazon expects capital expenditure to rise sharply, to about $220 billion this year, roughly $320 billion in 2027 and approximately $370 billion in 2028. Analysts estimate free cash flow at nearly negative $50 billion in both 2027 and 2028. The company also plans to transfer about $8 billion of Nvidia Grace Blackwell chips to an investor-backed SPV, lease them back and raise external debt plus up to 10% equity. Amazon has filed for an eight-tranche U.S. bond offering of at least $25 billion, with fixed- and floating-rate senior unsecured notes maturing in 3 to 40 years, including 10-, 30- and 100-year bonds.

The FTC and 22 states sued Amazon, alleging that undisclosed advertising-reserve pricing may have caused about 1.2 million advertisers to overpay since 2019. Amazon cut fewer than 1,000 white-collar positions in its Stores division across the U.S., India and the U.K. Annual advertising revenue tied to on-site browsing exceeded $68 billion. Tigress, TD Cowen, Rosenblatt and New Street raised their price targets to $385, $350, $360 and $385, respectively.

why it matters

The combination of heavy AI investment, new borrowing and negative free cash flow puts Amazon’s financing needs under closer scrutiny. AWS and advertising provide support, while the FTC case and restructuring add uncertainty for investors.

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