Key Takeaways:
Amazon jumped 4% to $265.25 while NVIDIA slid 4% to $218.68, a split tape that shows where Wall Street thinks AI infrastructure profits are heading.
Amazon shares surged 4% to $265.25 on Friday after the company and its largest chip supplier confirmed an expanded deal to deploy 2 million additional GPUs for AWS, even as NVIDIA fell 4% to $218.68 in the same session.
"AI has reached its inflection point. It's doing useful work. Its tokens are productive and profitable. Now, compute is revenue," Jensen Huang, chief executive at NVIDIA, said after the company's earnings report.
AWS revenue rose 37% year over year to $42.23 billion in the second quarter, its fastest growth in 18 quarters, while CEO Andy Jassy said the AI and Chips businesses each eclipsed run rates of more than $25 billion. NVIDIA delivered revenue of $96.221 billion and Data Center revenue of $89.023 billion.
The split puts the forward story on 2027 AWS monetization and NVIDIA supply catching up to demand, with Evercore ISI raising its Amazon price target to $355 from $315.16.
The announcement, made Wednesday evening, Aug. 26, extends the partnership across AI infrastructure, agentic AI, and warehouse robotics, with TechCrunch characterizing the move as Amazon tripling its NVIDIA chip order on surging demand. The market is treating the deal as confirmation of AWS momentum.
NVIDIA's slide traces to a broad pullback in semiconductors rather than the announcement itself, with no NVIDIA-specific event verified Friday. The Technology Select Sector SPDR ETF fell 1% to $185.89 and the Invesco QQQ Trust slipped 0.7% to $715.86, running against Amazon's rally.
NVIDIA is the vendor selling those chips, so the divergence looks strange, but the two moves have different causes. Management warned that "memory scarcity today is being driven in large part by the AI build-out itself" and expects gross margin to trough near 71% to 72%, with that margin risk weighing on the group.
Microsoft rose 2% to $517.09 and Alphabet gained 2% to $346.45, as hyperscale platforms with visible customer commitments caught a bid while their upstream chip supplier lagged.
Amazon spent $131 billion on capital expenditures in 2025, up from $83 billion in 2024, and raised its 2026 figure to approximately $220 billion, while trailing free cash flow turned to negative $7.6 billion against $161.4 billion in operating cash flow over the twelve months ended June 30. Some traders treat the deal as confirmation of AWS scale, while others focus on capital intensity and depreciation pressure.
Options positioning skews light on downside insurance, with NVIDIA's put/call ratio at 0.56 across the full chain. Investors can watch for Amazon holding its gains as the technology sector weakens, alongside NVIDIA stabilizing once semiconductor selling exhausts. Given the split tape, position sizing matters more than direction, with any Amazon extension above recent highs and any NVIDIA reclaim of its post-earnings level as the next technical checkpoints.
This article is for informational purposes only and does not constitute investment advice.
