Amazon reports faster AWS growth amid rising AI competition pressures

Eagle Capital Management released its second‑quarter 2026 investor letter on August 18, 2026, and singled out Amazon.com, Inc. (NASDAQ: AMZN) as a key holding. The letter notes that Amazon’s cloud unit, Amazon Web Services (AWS), is growing faster and more profitably than previously expected, but that the competitive environment is tightening as more hyperscalers and AI labs enter the market. Eagle’s portfolio is trading at a 20 % discount to market, with the firm projecting a quicker earnings‑per‑share rise than the broader market.

The letter frames the current surge in artificial‑intelligence spending as a driver of S&P 500 earnings growth, while also warning that high valuations and concentrated demand could backfire. Eagle argues that the earnings reported by companies like Amazon can overstate underlying economics because semiconductor equipment is depreciated over many years, masking weaker free‑cash‑flow growth. The firm believes that competition and new capacity from AI‑focused firms will eventually separate winners from losers, prompting Eagle to shift capital toward attractive opportunities outside the crowded AI space while keeping a selective stake in high‑quality beneficiaries.

Amazon’s share price closed at $259.45 on the day the letter was released, giving the company a market cap of roughly $2.8 trillion. Over the past month, Amazon shares rose 5.96 %, and they have gained 15.92 % in the last 52 weeks. Eagle highlights that Amazon’s consumer platform gives it scale advantages and the ability to deploy AI to strengthen its lead, while its retail, search, and advertising businesses continue to grow at rates well above GDP. The firm notes that Amazon and MercadoLibre could benefit more from advertising and consumer‑search improvements than brick‑and‑mortar peers.

Looking ahead, Eagle says it will recycle capital into opportunities that are not saturated by AI competition, but it will maintain a selective position in companies that can thrive across multiple scenarios. The firm’s outlook suggests that Amazon’s AWS growth will remain a cornerstone of its strategy, but investors should watch for how the broader cloud and AI market structure evolves. The letter signals that Eagle expects a shift in capital allocation as new entrants reshape the competitive landscape, and that the firm will adjust its portfolio to capture upside while managing valuation risk.