Cloud Infrastructure Spending Drives Amazon and Alphabet Stock Valuations Lower
Amazon and Alphabet shares have lost market luster in recent months, with Amazon down over 10% from its summer all-time high and Alphabet off by 14%, according to financial market data. Upcoming corporate earnings releases later this month could reshape investor views on these tech giants as cloud computing and massive capital expenditure programs take center stage.
While Google search and the core e-commerce platform built these companies, cloud computing now represents the primary vehicle for future expansion. At its core, cloud infrastructure operates as a high-capacity rental model. Tech giants build massive excess computing capacity and rent it out to enterprise clients. This arrangement proves cost-effective for businesses that prefer running workloads on third-party servers rather than deploying proprietary physical infrastructure. It keeps client balance sheets asset-light while offering elastic scaling capabilities.
Cloud Margins Stay High as Capital Spending Rises
Cloud computing segments for both firms consistently generate operating margins of 35% or better. Amazon Web Services (AWS) and Google Cloud would command trillion-dollar valuations if operated as standalone entities. Gross margins sit at 50.77% for Amazon and 60.94% for Alphabet, underlining the underlying strength of their digital infrastructure businesses. Implied market cap may vary.
Building out this scale requires immense capital deployment. Amazon is projected to spend approximately $220 billion in capital expenditures in 2026, while Alphabet is slated to invest roughly $200 billion. These figures are expected to escalate further in 2027 and beyond. Demand for artificial intelligence computing power drives this spending, as existing data center capacity remains insufficient to support heavy AI workloads.
| Company | Market Cap | Estimated 2026 CapEx | Cloud Revenue Growth (Q2) | Gross Margin |
|---|---|---|---|---|
| Amazon (AMZN) | $2.8T | ~$220 Billion | 37% YoY | 50.77% |
| Alphabet (GOOGL) | $4.3T | ~$200 Billion | 82% YoY | 60.94% |
Accelerating Cloud Revenue and Upcoming Q3 Reports
Growth metrics across both cloud divisions show clear acceleration. AWS posted a 37% year-over-year revenue increase in the second quarter, up from 28% growth in the first quarter. Heavy capital spending on data center infrastructure positions Amazon to maintain this accelerated trajectory. Meanwhile, Alphabet experienced an 82% surge in cloud computing revenue during Q2, accelerating from a 63% increase in Q1.
Alphabet is also expanding its commercial strategy by selling custom AI chips directly to select enterprise clients, bypassing the exclusive requirement to lease compute power through Google Cloud. When both companies release their third-quarter financial results in late October, the market data provided is expected to shift investor sentiment.
Amazon and Alphabet Record Current Trading Data
Amazon shares record a day’s range of $253.17 to $260.14, with a 52-week range spanning $253.17 to $260.14 and $196.00 to $287.20. Trading volume stands at 36.2M against an average volume of 39.1M. Meanwhile, Alphabet registers a day’s range of $343.07 to $350.80 and a 52-week range of $235.84 to $408.61, accompanied by a volume of 20.9M, an average volume of 27M, and a dividend yield of 0.25%. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia.
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