Amazon has announced a delay in some of its commitments regarding new data center leases, according to analysts at Wells Fargo. This development, revealed on Monday, marks a significant shift in the tech giant’s strategy and reflects broader economic uncertainties impacting technology companies’ spending plans.
Further, Wells Fargo analysts told us that they had been receiving intel all weekend. They observed that Amazon Web Services (AWS) has called off negotiations with colocation partners—particularly on international leases. This retreat marks a new Amazon—one that’s taking a more tentative, cautious tactic as it faces the fallout from this economic downturn.
Amazon Web Services is recognized as a leading provider of cloud infrastructure, competing closely with Microsoft, another major player in the sector. So far this year, both companies have dramatically ramped up their capital expenditures. They are undertaking this to enhance the rapid growth being driven by the generative artificial intelligence explosion. Alongside these ambitious growth plans, downward trends are pushing many toward a more cautious growth posture.
“Over the weekend, we heard from several industry sources that AWS has paused a portion of its leasing discussions on the colocation side (particularly international ones),” – Wells Fargo analysts.
In addition to Amazon’s actions, a Microsoft executive indicated that the company is slowing down or temporarily pausing early build-out projects. This pattern reflects a more general feeling among big tech companies as they continue to contend with the mounting economic pressures. Earlier this year, Wells Fargo analysts noticed that Amazon and Microsoft were narrowing the scope of many new projects. They’re still not canceling any of their previously signed contracts.
Perhaps that’s why investors have become increasingly alarmed by a host of red flags on the economic horizon. Consequently, the decision has been made to postpone firm lease commitments. Just prior to the announcement regarding tariffs earlier this month, both companies appeared to be reassessing their growth strategies in light of potential market volatility.
Amazon stock prices were losers on the day Monday. This drop was part of a larger 25% year-over-year decrease. Wells Fargo’s continued hold rating on Amazon shares embodies this cautious take, with an eye toward these shifting economic conditions.