Good morning, investors. The market is in the midst of a great rotation.

Big Tech stocks are pulling back and the S&P 493 is pulling ahead. Small and mid-cap names are climbing while mega-caps are faltering.

This may well end up being the dominant narrative for investors this year.

Today we zero in on the one name that’s suffered the worst sell-off in the rotation.

Wall Street has soured on Amazon more than its Magnificent 7 peers.

The stock has been in a free fall in February, dropping 17% and erasing roughly $450 billion in market capitalization. Among mega-cap names, it’s emerged as the clearest casualty of the market’s disillusionment with AI spending.

Indeed, there seems to be a “show me the money” moment driving the sell-off.

Amazon is preparing to outspend every other corporation in the AI infrastructure buildout, guiding toward roughly $200 billion in capital expenditures for 2026.

By comparison, Alphabet and Microsoft have forecasted spending to hit $175 billion and $140 billion, respectively.

To be clear, those are also eye-watering numbers. Yet Alphabet and Microsoft both command relatively high-margin software franchises that will generate plenty of cash even before AI returns are realized:

Meanwhile, growth for Amazon Web Services hovers at 24% year-over-year — solid, but apparently not explosive enough to justify its historic spending plans in the eyes of a hesitant market.

Unlike other Magnificent 7 companies, Amazon must fund its AI buildout alongside a vast, lower-margin retail and logistics business.

Every dollar put into AI must coexist with the relatively thin margins of warehouses, trucks, and e-commerce.

That realization has left the market increasingly worried about Amazon’s free cash flow and the sustainability of its ambitions.

One reason the other mega-cap stocks, for their part, have declined less than Amazon this month is because forecasts still see those names remaining firmly cash-flow positive, even with elevated spending.

For this leg of the AI trade, scale alone isn’t cutting it so far.

While spending more than your competition proved to be a winning strategy last year, investors aren’t so easily swayed anymore.

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📉 Amazon has shed $450 billion in value. The stock is coming off nearly a two-week losing streak to mark its worst sell-off since 2006. The market seems to be questioning its ambition AI spending plans. (CNBC)

📊Stocks are swinging violently in both directions. About 30% of S&P 500 stocks have moved over 20% in three months, double the historical average. Increased hedge fund flows are exacerbating extreme price action. (Barron’s)

📈Micron is spending big on AI infrastructure. It plans to expand its US manufacturing capabilities with $200 billion, and the memory-chip maker is now racing to avert a severe supply crunch. (WSJ)

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🗓 February 18, 1982: The Mexican government ended support of the peso, catalyzing a 30% weakening in the currency that became an early domino in the Latin American debt crisis of the 1980s.

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