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In pre-market trading, Amazon shares fell 2.0% to $240 amid several negative developments: a US Senate investigation into possible Chinese influence on the company's marketplace, fresh cuts in its artificial general intelligence unit, and broad market caution a week before the company's quarterly results, scheduled for July 30.
Republican staff on the Senate Committee on Small Business are conducting an inquiry into whether China exerts improper influence over Amazon's marketplace.
According to the investigation, lawmakers examined alleged company negligence and told at least one witness they possess compelling evidence. The probe adds a new layer of regulatory and reputational uncertainty for the company ahead of its second-quarter results.
Additional pressure on the shares came from layoffs in the artificial general intelligence development unit: staff reductions were recorded on July 22, though the exact number dismissed was not disclosed. This follows targeted cuts after the mass layoff of 16,000 employees in January.
Although Amazon says the moves reflect a focus on core customer priorities, investors are unsettled by the strategic coherence of its AI efforts and the company's ability to monetize large infrastructure investments.
Concerns were heightened by an analysis cited by the Bank for International Settlements: Amazon and four other major tech firms have amassed a combined $1.65 trillion of off-balance-sheet AI commitments.
That amount is estimated to exceed their disclosed combined debt and has grown eightfold over four years, raising doubts about whether AI capital expenditure will outstrip free cash flow generation by 2027.
Against this backdrop, BofA Securities maintained a Buy rating on Amazon shares and reaffirmed a $310 price target ahead of the earnings release.
The bank also raised its second-quarter revenue forecast to $198.8 billion and expects AWS to grow 33% year-on-year—positives that only partially softened the day's negative tone.
The broader market did not provide support: the S&P 500 fell 0.45%, the Dow Jones dropped 0.44%, and the Nasdaq declined 0.65%, reflecting reduced risk appetite in US equity markets. The combination of unexpected regulatory developments, cuts in the AI unit, and macro worries created a challenging pre-earnings backdrop in pre-market trading.
About a week remains until second-quarter results are released, and Amazon shares are trading roughly 14% below their 52-week high of $278.56. Clearly some investors are trimming positions ahead of the report, which is likely to attract close scrutiny.
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