The once-unstoppable Mag 7 are showing cracks, with most companies falling short of sky-high expectations during this earnings season. Tech selloffs have intensified, dragging the group lower amid concerns over ballooning AI capex without proportional returns. Amazon stands out as a potential lifeline, with AWS delivering robust AI-driven growth that could offset broader worries and support the stock amid the rotation to defensives.
Amazon's cloud arm AWS reported strong momentum, with revenue climbing 19% year-over-year to $27.5 billion in the latest quarter. AI services within AWS grew even faster, up 48% as customers ramped adoption of Bedrock and SageMaker tools for custom model building. This performance highlights AWS's edge in enterprise AI workloads, where high-margin recurring revenue from training and inference helped lift overall cloud margins to 37%. However, total company capex hit $22 billion, up 28% year-over-year, raising questions about whether AWS gains can fully counter the spending pressure and sustain investor confidence.
In the broader Mag 7 picture, the group has underperformed relative to earlier quarters. Microsoft saw Azure AI growth slow to 33%, Alphabet's cloud expansion hit 28%, and Meta's ad AI efficiencies boosted ROI but couldn't fully offset Reality Labs losses. The selloff reflects skepticism around whether these heavy investments will deliver near-term profitability or simply fuel a prolonged capex cycle with diminishing returns.
Here's a quick snapshot of Mag 7 AI-related performance in recent quarters:
$Amazon.com(AMZN)$ $Microsoft(MSFT)$ $Alphabet(GOOG)$ $Meta Platforms, Inc.(META)$ $NVIDIA(NVDA)$
Revenue trajectory for AWS shows steady acceleration:
The question remains whether AWS's strength can outweigh capex concerns and reward bold AI positioning. If AWS guidance exceeds $29 billion for the next quarter and AI services continue outpacing overall cloud growth, it could stabilize Amazon shares and lift sentiment across the Mag 7. However, if capex continues climbing without clear margin expansion, the group faces prolonged pressure as investors rotate elsewhere.
For traders eyeing this setup, Amazon's dip offers a tactical entry near $208 support for a potential rebound to $220 if AWS commentary shines. Broader Mag 7 weakness suggests caution, with selective strength in consumer AI plays like Meta's ad efficiencies providing better near-term visibility than pure cloud bets.
Overall, Amazon's AWS performance provides a bright spot in an otherwise dimming Mag 7 picture, but sustaining high margins while scaling AI infrastructure will be the true test for long-term leadership.
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