Alibaba and Amazon Face the Same AI Spending Question: How Quickly Does Capacity Become Cash?

As Chinese and American tech giants Alibaba and Amazon grapple with AI spending, both face a crucial question: how quickly will infrastructure investments translate into cash? September coverage highlighted differing spending intensities while underscoring the need for more than headline capital expenditures to determine which company is truly gaining.

Alibaba's August report revealed a 45% surge in AI Cloud and Compute Services revenue to RMB48.44 billion, with adjusted EBITA reaching RMB5.63 billion. While this demonstrates operating progress, the company reported negative free cash flow of RMB44.67 billion, indicating that spending may still outweigh returns. Amazon's July results showed a 37% growth in AWS revenue to $42.2 billion and operating income of $16.6 billion.

However, Amazon also disclosed negative free cash flow of $7.6 billion over the last year, primarily due to increased investments in property and equipment. Both companies are optimistic that capacity will foster durable customer spending, but they both recognize that the cost of installation, competition, and utilization may reduce returns beyond initial growth predictions.

Insider Monkey's database tracked 97 Alibaba holders in Q2 2026 and 369 Amazon holders, as well as notable investors David Tepper and Dan Loeb. Nonetheless, both companies acknowledge that improved cash generation alongside cloud growth is the key to determining the value of their investments. Interest in these stocks remains high, with 2.00% of Alibaba's float and 0.97% of Amazon's held in short positions.

While each company's situation is unique, both must demonstrate durable returns on their AI spending to justify investment.