Wall Street bank Goldman Sachs has issued a warning for tech titans like Amazon.com Inc.
The Cost Of The Capex Boom
According to Goldman's portfolio strategy report, the physical footprint required to support massive AI workloads is rapidly forcing these historically asset-light hyperscalers to become capital-intensive enterprises.
Consensus estimates show that AI hyperscalers-including Amazon, Microsoft, Alphabet Inc.
Goldman Sachs highlights that this explosive spending has caused tech leaders to grow significantly in "asset intensity," resulting in steadily declining sales-to-asset turnover since the start of the AI boom.
During the next few years, rising hyperscaler depreciation costs will aggressively eat into profit margins. Specifically, analyst estimates imply that depreciation and amortization will climb from just 7% of hyperscaler revenues in 2022 to a staggering 12% by 2027.
Margin Drag And Capital Dilution
To fund this relentless infrastructure build-out, companies are pulling back on stock buybacks and turning heavily to external capital. Net debt for these hyperscalers has increased by $170 billion since the start of 2025, while float shares outstanding have concurrently begun to rise.
This dilution and borrowing create a dual headwind for corporate profitability. Consequently, consensus estimates imply that ROE for the seven largest technology stocks will contract by an "average of 700 bp next year," reversing a portion of the historic profitability that previously supported record-high S&P 500 valuations.
The Ultimate Monetization Test
Despite these growing near-term structural pressures, Goldman emphasizes that the long-term impact on tech sector profitability will ultimately "depend on the magnitude of returns on their investments."
Fortunately, the first quarter earnings season offered solid evidence of their ability to "monetize AI," marked by positive revenue revisions, expanding backlogs, and rising gross margins.
How Have AMZN And MSFT Performed In 2026?
Shares of AMZN have advanced by 2.89% year-to-date. It closed 3.46% lower at $237.50 apiece on Wednesday, and it was up 1.12% in premarket on Thursday.
Over the last month, AMZN stock was down 10.09%, and it rose 7.33% over the last six months; the stock was 10.56% higher over the year. Benzinga's Edge Stock Rankings indicate that AMZN maintains a weak price trend in the short term but a strong trend in the long and medium terms, with a solid growth score.
Shares of MSFT have declined by 21.65% year-to-date. It closed 3.79% lower at $378.91 apiece on Wednesday, and it was up 0.55% in premarket on Thursday.
Over the last month, MSFT stock was down 10.19%, and it fell 20.42% over the last six months; the stock was 20.74% lower over the year. Benzinga's Edge Stock Rankings indicate that MSFT maintains a weak price trend in the long, medium, and short terms, with a solid quality score.
