Key Highlights

● Amazon closed at $243.79 on Thursday ahead of its Earnings report.

● Alphabet's worst day since its 2004 IPO fuelled nerves about AI spending.

● Earnings per share of $1.89 missed the $1.97 estimate after the bell.

● Trailing twelve-month free Cash Flow was negative $42.4 billion.

Amazon (NASDAQ:AMZN) shares sank during Thursday's regular session, weighed down by Alphabet (NASDAQ:GOOGL)'s collapse and nerves about AI spending, before the company had released a single number.

Selling before the news

Amazon's earnings were due after the closing bell on Thursday, October 29. Investors did not wait. During the regular session, the stock slid to close at $243.79, one of the heavier decliners on the Dow Jones Industrial Average, the S&P 500 and the Nasdaq-100.

The selling reflected anxiety rather than any new information about Amazon itself. No company-specific news was released during the session. The biggest driver was what had happened to Alphabet the night before.

The Alphabet effect

Alphabet's third-quarter results, released on Wednesday evening, rattled the market. The company missed on Revenue and earnings, posted negative free cash flow of $9.07 billion, and maintained its 2026 capex guidance of $195 billion to $205 billion. One report said the results "reignited concerns over mounting AI costs."

On Thursday, Alphabet's shares collapsed to $283.82, their worst day since the company's 2004 IPO, wiping out roughly $500 billion in market value. As another report framed it, Alphabet's plunge raised the stakes for Amazon's cloud report.

That was the crux. Amazon, like Alphabet, is spending enormous sums on AI infrastructure, with a $220 billion capex plan for 2026. Investors were worried that Amazon's numbers might expose the same tension between heavy spending and cash generation.

The Dow's heavy names

Amazon was one of several big names that pulled the Dow down 132.54 points to 52,342.56. Caterpillar (NYSE:CAT) had its worst day since March 2020, and Salesforce (NYSE:CRM) slid with software stocks. Merck (NYSE:MRK) and Nike (NYSE:NKE) provided some offset.

The consumer discretionary sector also slipped, largely because of Amazon's weight in it. Meanwhile, health care, real estate, consumer staples and utilities led the market higher.

When the numbers arrived

After the bell, Amazon's results arrived and the stock fell further in after-hours trading. Net sales reached $201.9 billion, while Earnings Per Share of $1.89 fell short of the $1.97 estimate. AWS revenue came in at $46.0 billion, a strong acceleration. But the company's fourth-quarter sales guidance of $240 billion to $247 billion had a midpoint below the $244.5 billion consensus, and trailing twelve-month free cash flow was negative $42.4 billion, compared with positive $14.8 billion a year earlier.

Reports differed on the depth of the after-hours decline as prices moved through the evening, with one source describing a steep early drop that later pared. Combined with Intel (NASDAQ:INTC)'s after-hours slide, it pushed Nasdaq-100 futures lower, according to market data.

A market grading on cash flow

The pre-earnings slide and the after-hours decline both pointed to the same theme. Investors are now judging the AI spenders on cash flow, not just growth. One market analyst said that "markets are no longer rewarding companies simply for investing heavily in AI."

One strategist said that "There's plenty of other places to go with your money outside of the AI trade that have pretty decent prospects." On Thursday, plenty of investors appeared to agree, with the Russell 2000 gaining 28.71 points.

What to watch

Watch where Amazon opens on Friday, October 30, after the regular session and after-hours declines. Analysts will be digesting the free cash flow figures and the capex commitment. Watch whether AWS's acceleration is enough to win back investors over time, and whether the market's focus on cash flow continues to weigh on the biggest AI spenders as October ends.