The performance of Amazon’s (AMZN) cloud business, AWS, will be closely watched following its earnings report after Microsoft’s (MSFT) stock price plummeted last week, in part due to slowing cloud growth.
Bloomberg reports:
That wasn’t a problem for Amazon’s October earnings, as Amazon Web Services, also known as AWS, reported better-than-expected revenue, sending the company’s stock up nearly 10%. Now, however, fear is sweeping the tech industry, with Amazon investors increasingly concerned that a slowdown in Microsoft Azure points to broader weakness facing cloud providers.
“It’s unclear how much of Microsoft’s disappointment is due to company-specific issues and how much may reflect an overall slowdown in the cloud space,” said David Miller, chief investment officer at Catalyst Funds, which holds Amazon stock in multiple portfolios. “If it’s the latter, this situation may continue.”
…Amazon’s results come against the backdrop of anti-software sentiment that is weighing on the entire tech industry as investors try to pick winners and losers from hundreds of billions of dollars spent developing artificial intelligence.
Microsoft’s aggressive AI-related capital spending, coupled with Azure’s slowing growth, raises new questions about when those investments will reap greater returns.
“It’s really about what the stock has priced in and what I think has started to price in [Microsoft] “Higher growth rates are always a little bit dangerous. We haven’t really seen Amazon move up in the same way,” said Melissa Otto, director of technology, media and telecom research at Visible Alpha.
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