Key Points
Amazon increased its AI spending to $220 billion for 2026, up from $200 billion, largely due to rising memory costs.
AI spending overall is rising at a shocking clip, by some estimates up 500% since 2022.
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The hot technology of the day is artificial intelligence (AI). It is likely to change the world the same way that the internet did at the turn of the century. Companies like Amazon (NASDAQ: AMZN) are spending massive sums of money to build AI businesses. At last count, Amazon’s 2026 AI spending plans totaled $220 billion. There appears to be unlimited demand for AI, so spending on building AI infrastructure is going through the roof. But will all of that spending pay off?
What did Amazon just announce about AI spending?
When Amazon reported its second-quarter 2026 results, it announced that it increased its AI spending to $220 billion, up $20 billion from its February estimate. According to the company, that figure was pushed higher by rising costs for memory chips. That’s a 10% increase in less than six months, with the company showing no interest in slowing down. Even at the current spending rate, it believes it won’t have enough artificial intelligence capacity to keep up with demand.
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image source: Amazon.com Inc
This sounds like an amazing situation for a company to be in, but there are caveats that investors need to consider. The most important one probably comes from looking at the big picture. By some estimates, AI spending has increased 500% since 2022. That’s a historical look at what has already been spent using Census Bureau statistics, with the data suggesting exponential growth. Amazon’s AI update suggests that future spending will be even higher.
If you have been investing long enough to remember the dot-com boom, then you remember the huge spending that went into building out the internet. The spending around AI is eerily reminiscent of that period, which ended in the dot-com bust. There are already worrying negative impacts from the current round of technology spending.
No trend lasts forever
Notably, the increase in AI spending that Amazon just announced was driven by rising memory chip prices. Electricity demand is strained as well, a fact that is hitting people’s wallets across the country. Demand for AI isn’t likely to be infinite any more than it was for the internet. Which means that eventually, companies like Amazon will likely find they’ve overspent on the AI build-out. If the dot-com bubble’s burst is any indication, when the overspending becomes apparent, companies like Amazon could suffer.
The upside is that the overspending could bring AI costs down, as happened with the internet. And that could usher in a new round of innovation. But the biggest risk for companies like Amazon spending heavily on AI today, in the early stages of the technology’s build-out, is that trees don’t grow to the sky.
Should you buy stock in Amazon right now?
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
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