Amazon Shares Face Pressure as Analyst Downgrade Raises AI Investment Concerns

Amazon investors experienced a sharp reversal this week as a significant rating change from Rothschild & Co Redburn triggered substantial selling pressure. The dramatic shift comes just as the stock reached a record high of $260 in early November, highlighting the fragile sentiment surrounding technology equities despite strong fundamental performance.

Investment Bank Questions AI Profitability Timeline

Rothschild & Co Redburn’s decision to downgrade Amazon from “Strong Buy” to “Hold” centers on growing skepticism about the returns from massive artificial intelligence investments. The firm’s analysts expressed concern that investors are granting technology companies “excessive credit” for their billion-dollar AI expenditures, questioning whether these investments can ever match the profitability achieved during the initial cloud computing era. According to their assessment, there appears to be “no clear path back to that level of profitability.”

This warning echoes broader market anxieties as industry giants including Amazon, Microsoft, and Google pour unprecedented resources into AI infrastructure without clear timelines for meaningful returns.

Strong Quarterly Results Overshadowed by Broader Concerns

The timing of the downgrade appears counterintuitive given Amazon’s impressive third-quarter performance. The company reported earnings per share of $1.95, significantly surpassing the $1.57 consensus estimate, while revenue expanded 13.4% to $180.17 billion.

Amazon’s cloud division, AWS, demonstrated particular strength with 20% growth to $33 billion—its fastest expansion pace since 2022. The North American segment advanced 11%, while international operations grew even faster at 14%.

Operating profit reached $17.4 billion, though this figure included substantial one-time charges: $2.5 billion for a Federal Trade Commission settlement and $1.8 billion for planned workforce reductions. Excluding these items, adjusted operating profit would have totaled $21.7 billion, underscoring the company’s underlying operational strength.

Should investors sell immediately? Or is it worth buying Amazon?

Technical Indicators Flash Warning Signals

Market technicians observed concerning patterns in Amazon’s price action. The stock has already retreated more than 10% from its $260 peak, with the Relative Strength Index (RSI) plunging from above 70 to below 50 within a remarkably short period. This represents a dramatic shift from overbought to nearly oversold conditions that historically has preceded significant corrections.

Amazon shareholders witnessed a similar pattern in December 2024, when an RSI collapse preceded a 35% decline that persisted until April 2025. The current selling intensity has market participants watching closely for a potential repeat scenario.

Strategic Moves Highlight Capital Reallocation

Beyond operational performance, Amazon made notable strategic financial moves during the quarter. The company divested its entire positions in quantum computing firm IonQ (854,207 shares) and chip manufacturer AMD (822,234 shares). Simultaneously, Amazon placed a $15 billion bond offering—its first U.S. dollar-denominated issuance in three years—with proceeds directed toward AI infrastructure development.

These transactions suggest active capital structure management as the company pivots resources toward artificial intelligence initiatives while maintaining financial flexibility.

Divergent Analyst Views Create Market Uncertainty

The investment community remains divided on Amazon’s prospects. While the consensus rating stands at “Moderate Buy” with an average price target of $294.70, contrasting opinions are emerging. Loop Capital maintains a bullish $360 target, implying strong confidence in Amazon’s ability to monetize AI investments—precisely the assumption Rothschild’s downgrade challenges.

Market attention now turns to several key developments: fourth-quarter results and 2026 guidance will be crucial in demonstrating whether AI expenditures can translate into sustainable profits. Additionally, Nvidia’s November 20th earnings report may significantly influence sentiment across all AI-exposed stocks, potentially determining whether the artificial intelligence optimism persists or continues to deteriorate.