Amazon’s performance (AMZN) cloud business, AWS, will be closely scrutinized when its earnings report comes later, after Microsoft (MSFT) shares fell last week, in part due to a slowdown in cloud growth.

Bloomberg reports:

That wasn’t a problem for Amazon’s October earnings, as its stock jumped nearly 10% after better-than-expected revenue from Amazon Web Services, also known as AWS. Now, however, fear is spreading across the tech sector, with Amazon investors increasingly worried that the slowdown in Microsoft Azure signals broader weakness for cloud providers.

“It’s unclear how much of Microsoft’s disappointment could be due to company-specific issues and how much could reflect a general slowdown in the cloud space,” said David Miller, chief investment officer at Catalyst Funds, which holds Amazon shares in several portfolios. “If it’s the latter, this could continue.”

… Amazon’s results come against a backdrop of anti-software sentiment weighing on the entire tech sector as investors try to sort out the winners and losers from the hundreds of billions of dollars being spent to develop artificial intelligence.

Microsoft’s aggressive AI-related capital expenditures, coupled with slowing Azure growth, raised new questions about when those investments will pay off more substantially.

“It’s really about what’s already priced into the stock, and I think what was starting to price for (Microsoft) was a higher growth rate, which is always a little bit dangerous,” said Melissa Otto, head of tech, media and telecom research at Visible Alpha. “We haven’t really seen Amazon move forward in the same way.”

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