How could concerns over storage stock risks affect Amazon's data center demand?
Storage stock risks may slow Amazon's data center expansion Jim Cramer warned that storage giants like SanDisk and Western Digital face significant downside risk if data center capacity shrinks. This warning is based on the premise that storage suppliers' profits depend on hyperscalers continuing to expand AI infrastructure. Since Amazon operates as a hyperscaler and relies on data center growth, a slowdown in this spending cycle could reduce Amazon's demand for storage devices and related infrastructure, impacting its capital expenditure plans.
- Effect
- Mild negative
- How direct
- 2 steps, 1 inferred by Brind
- When
- Within months
- The story
- Gone quiet
How it reaches Amazon
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Jim Cramer warned that SanDisk and Western Digital are dangerous stocks if data center capacity shrinks. He noted that the stocks' recent gains assume hyperscalers continue expanding AI infrastructure. Microsoft spent $115.948 billion on capital expenditures in fiscal 2026 and anticipates $175 billion in fiscal 2027.
The full event1independent outlet -
Cramer's warning about storage stocks is predicated on the risk that hyperscalers might slow down their expansion of AI infrastructure. This risk is highlighted by the fact that Microsoft, a major hyperscaler, noted that about two-thirds of its quarterly capital expenditures go to short-lived chips that it can stop buying if demand changes.
1 report connects these two. Brind only summarizes; follow a link to read the reporting itself.
- 247wallst.com Oct 20
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American multinational technology corporation
Everything about Microsoft -
If major hyperscalers, like Microsoft, reduce their capital expenditures, the overall pace of data center building slows. As Amazon is a hyperscaler that requires massive storage capacity for its data centers, a reduction in the market's expansion pace would directly reduce Amazon's demand for storage devices and related components.
No report states this step directly. Brind drew it from the reporting on each side of it, so treat it as an informed guess.
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American multinational technology company
Everything about Amazon
Tap any step to see the evidence behind it.
The facts so far
As reported. Each one links to where it comes from.
- SanDisk supplies storage devices for Amazon data centers and sells products through the Amazon retail marketplace.247wallst.com
- Storage suppliers' sales depend on hyperscalers keeping expanding AI infrastructure.247wallst.com
- Microsoft expects about $175 billion in capital expenditures in fiscal 2027.247wallst.com
- Cramer warned that if there is fewer data centers, SanDisk and Western Digital are the worst stocks to own.247wallst.com
Why it matters
For Amazon, the continued expansion of data centers is fundamental to its growth strategy and cloud services revenue. The company relies on massive, ongoing capital investments in infrastructure to support its services, including those driven by AI demand. A slowdown in the broader hyperscaler spending cycle could force Amazon to temper its infrastructure buildout plans, potentially affecting its operational costs and growth trajectory.
This risk is shared across the entire cloud computing industry. The reports note that storage stocks are treated as one AI data center trade, meaning that the fortunes of companies like SanDisk and Western Digital are tied to the collective spending decisions of major players like Microsoft and Amazon. The market is currently pricing in peak-cycle demand, making the industry sensitive to any shift in spending sentiment.
What we don't know yet
- Will Microsoft and other major hyperscalers maintain their current high capital expenditure plans?
- How quickly would a slowdown in data center construction translate into reduced demand for storage devices?
What would change this answer
Who else could feel it
Other possible ripples from the same event.
Reporting
- 247wallst.comOct 20
Keep going
Brind's analysis is written by AI from the reporting linked above and can be wrong. This explainer is a possibility worth considering, not a forecast: steps marked as Brind's reasoning are not stated in the reporting. It is not investment advice; do your own research.