Amazon shares slumped nearly 7% on Friday after the company’s cloud business, Amazon Web Services (AWS), posted slower growth than rivals Microsoft and Alphabet, prompting fresh concerns over its positioning in the AI-driven cloud race.AWS revenue rose 17.5% in the June quarter, narrowly beating Wall Street estimates, but trailing far behind Microsoft Azure’s 39% growth and Google Cloud’s 32%, Reuters reported. The underwhelming numbers came despite Amazon investing $31.4 billion in capital expenditure — outpacing peers — and forecasting full-year spending of $118 billion.As of 11:13 am ET, Amazon shares were trading at $215.95, down 7.76%.“The spotlight was firmly on AWS and it didn’t quite shine as brightly as expected,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown, quoted Reuters. “While Microsoft and Alphabet have already shown strong momentum in cloud growth, AWS wasn’t the knockout many wanted to see.”The market reaction was swift, with Amazon’s stock falling to $216.60 in early trading, wiping out nearly $170 billion in market value. The tech giant’s forward price-to-earnings ratio stood at 33.87, slightly behind Microsoft’s 34.19 but well above Alphabet’s 18.64, according to LSEG data.AWS, long seen as Amazon’s profit engine, accounted for about 60% of its operating income but saw its margins shrink to 32.9% — the lowest since Q4 2023. The company’s forecast for total operating income in the current quarter also fell short of market expectations.CEO Andy Jassy said during the earnings call that Amazon was still in the “very early days” of the AI race and that its scale would provide advantages once existing capacity constraints ease.At least 30 analysts raised their price targets for Amazon, while three lowered theirs, giving the stock a median target of $260.Even as AWS drew scrutiny, Amazon’s retail business remained a bright spot. The company reported an 11% jump in online store sales in Q2, beating estimates and showing resilience despite Trump-era tariffs. CEO Jassy said Amazon had not seen a notable rise in consumer prices or demand erosion so far this year.“If Amazon’s retail business was a standalone entity, it would be trading dramatically higher following the near-perfect results,” said Michael Morton, analyst at MoffettNathanson. “Unfortunately, as we all know, the success of the retail business is not what’s going to matter in the near term for Amazon’s stock price.”