Amazon Shares Drop 9% on AI Cost Worries

Amazon's stock plunged nearly nine percent in after-hours trade Thursday, spooked by a $9.5 billion AI hit. The company reported earnings of $1.89 per share, missing the $1.97 consensus. Revenue reached $201.9 billion, just under the $202.25 billion Wall Street expected. Amazon blamed the shortfall on a $9.5 billion pre-tax gain tied to its Anthropic AI investment. Investors are panicking across the sector, with Alphabet's shares tumbling 12% after its AI-driven search changes cut ad sales. Alphabet's market value fell more than $500 billion to $3.46 trillion, and its free cash flow turned negative by over $9 billion. The hidden cost is that massive AI outlays are eroding the cash that once funded core ad businesses. Amazon warned Q4 revenue will land between $240 billion and $247 billion, risking a miss of the $244.5 billion Street target. Forrester analyst Tracy Woo said the results "highlight the challenge of funding massive AI investments while keeping core businesses strong."