Amazon CEO Andy Jassy tells investors not to fear AI expenditure, says ‘It’s exactly why they will …’

Amazon CEO Andy Jassy has said that investors should not worry about Amazon’s heavy spending on AI, arguing that it will drive long-term growth. Speaking on “Mad Money” recently, Andy Jassy said the company’s large investments in AI infrastructure are necessary and is exactly why the investors will be rewarded over time. Jassy described AI as a major turning point in technology. “We believe that AI is the biggest technology transformation in our lifetimes,” he said. “It’s going to reinvent every single customer experience we know and altogether new ones we never imagined.” Andy Jassy added that the scale of Amazon’s investment reflects the size of the opportunity.

Amazon said earlier this year that it plans to invest $200 billion in capital expenditure, largely focused on AI infrastructure such as data centres. The announcement had initially caused concern in the market, with shares falling after the company’s earnings report. However, the stock later recovered and has since reached new highs.Jassy said such spending is necessary when the opportunity is large. “When you have shifts that are this momentous … you want to bet big,” he said.Andy Jassy pointed to the rapid growth of Amazon’s cloud business, Amazon Web Services (AWS), as proof that the company’s investments are paying off. “After the first three years of this incarnation of AI, our run rate is over $15 billion — 260 times what it was the first three years of AWS,” he said.AWS is expected to generate about $166 billion in revenue this year, showing the scale of Amazon’s cloud operations.

Andy Jassy addresses cash flow concerns

Some analysts have raised concerns that Amazon’s heavy spending could impact its cash flow in the near term. Jassy said this view does not fully reflect how the company operates. “We have to lay out capital and cash in advance of when we can monetize it,” he said.He explained that investments in infrastructure like data centres take time to generate returns but continue to produce revenue over many years.Jassy said that once revenue growth catches up with spending, the company’s financial performance improves.“When your revenue growth starts to catch up with the capital expenditure growth, you actually end up really liking the operating margin, the free cash flow, and the [return on invested capital],” he said. He added that Amazon has seen a similar pattern before with AWS and expects the same outcome with AI, but at a much larger scale.