Investing.com -- Needham analyst Laura Martin maintained a Buy rating on Amazon (NASDAQ: AMZN) with a $265 price target on Friday, while raising concerns about the company's capital expenditure strategy.

Martin noted that Amazon shares have been weak partly because the company is requesting nearly $200 billion in capital expenditure for fiscal year 2026. According to her calculations, every other hyperscaler is funding its fiscal 2026 capital expenditure from free cash flow.

Amazon CEO Andy Jassy defended the capital expenditure level in his shareholder letter published Thursday, arguing that building value is not a straight line. Jassy stated that "Every customer experience will be reinvented by AI, and there will be a slew of new experiences only possible because of AI," while also indicating Amazon will continue funding broad-based investments across retail, logistics, low Earth satellites, same-day-delivery, pharmacy, perishables, and business supplies.

Martin identified what she views as a contradiction in this approach. She argued that if AI changes everything, then capital allocated to non-AI assets carries higher risks and an inferior risk/reward structure. The analyst estimates that 70% of Amazon's fiscal 2026 capital expenditure is related to AI, and believes the company should cut the remaining capital expenditure until it becomes clear those businesses will not be disrupted by AI.

In he estimate, Amazon needs a 20% return on investment on its AI capital expenditure. She believes 20% should become the new minimum hurdle rate for every capital expenditure dollar spent inside Amazon, with anything lower pushed off by two to three years until after generative AI capabilities are built out.