Analyst Issues Rare Downgrade on AMZN & MSFT

Amazon (AMZN) and Microsoft (MSFT) fell about 2% in pre-market trading after Rothschild & Co Redburn analyst Alexander Haissl downgraded both stocks from Buy to Neutral.
The move comes amid a broader sell-off in AI-linked names as markets reassess the timing and profitability of hyperscaler AI investments.

Why the Downgrade?

Haissl pushed back against the widely accepted narrative that generative AI mirrors the early cloud boom. Instead, he argues that:

GenAI economics remain “far weaker than assumed.”
Revenue generation has not yet scaled in line with the massive infrastructure investments.
Hyperscaler spending continues to outpace monetization, raising cash-flow and profitability concerns.
Market expectations may be overly optimistic about GenAI adoption curves.

Over 90% of Wall Street analysts still rate both AMZN and MSFT as Buy-equivalents, making this downgrade a notable outlier.

Market Reaction

AMZN traded at $228.21 (-2.00%) pre-market
MSFT traded at $496.50 (-2.17%) pre-market
The move added pressure to the broader AI complex, which has been under scrutiny as investors reassess AI-driven growth assumptions.

Bigger Picture

The downgrade underscores a growing debate across the market:

When will AI infrastructure spending translate into meaningful earnings?
Are cloud giants over-investing ahead of real demand?
Is GenAI’s business model structurally less profitable than expected?

For now, investors appear cautious as the GenAI monetization timeline remains uncertain.