Jim Cramer is urging Amazon investors to remain patient and trust the cloud and e-commerce company’s massive spending strategy despite the evident risks it poses to profits. “I have total faith,” Jim said on Friday’s “Squawk on the Street.” “[Amazon CEO Andy Jassy] knows how to do this. So, I believe, and I’m not bolting.” Amazon shares fell 5.6% on Friday to $210 each after management issued the evening before a 2026 capital expenditures guide of $200 billion, compared to the $146.6 billion expected. The company also issued a lower-than-expected earnings outlook for the current quarter. Speaking to investors during their post-earnings conference call on Thursday, the team said a large part of that spending will go toward Amazon Web Services infrastructure, AI capabilities, and custom chips to meet rising cloud demand. Jassy touted the company’s Trainium custom chips as a key pillar of AWS’s strategy to make AI workloads more affordable. He said there is “very strong demand” for Trainium3 — the latest iteration – with nearly all supply expected to be committed by mid-year. He added that customers are already expressing strong interest in Trainium4, which is still in development. Outside spending and guidance, Amazon’s reported fourth quarter results were solid, with revenue and operating income beating expectations. Amazon Web Services cloud growth accelerated to 24% year over year, the fastest pace in 13 quarters. “I don’t want to get too negative [on Amazon] … only because it does sound like they have it in the backlog,” Jeff Marks, portfolio director for the Club, said Friday. AWS backlog reached $244 billion for the quarter, up 40% year over year and 22% quarter over quarter. Marks also noted that margins in the cloud unit are strong, which tells investors that “there’s no wasted capacity and it is running as efficiently as possible.” However, Amazon’s higher-than-expected capex implies it will have very little cash flow in the coming quarters. Going into Amazon’s earnings print, the free cash flow estimate for 2026 was $37 billion, according to FactSet. When squared with the $200 billion capex forecast for the year, which came in $50 billion above expectations, the company’s free cash flow for 2026 appears virtually nonexistent. Wall Street defines free cash flow as operating cash flow minus capital expenditures. To be sure, Amazon is not alone in ramping up spending. Other tech giants, including Alphabet and Meta Platforms , are also planning to spend more than expected. However, Jim noted that investors see clearer near-term returns on those AI investments, something Amazon has yet to fully prove. That uncertainty drove Wall Street firms to cut Amazon price targets. Wedbush cut its Amazon price target to $300 from $340; Cantor Fitzgerald lowered its target to $250 from $260; and D.A. Davidson lowered its target to $175 from $300 while downgrading the stock to neutral from buy. Apart from the high capex, D.A. Davidson argued AWS is falling behind Google Cloud, which accelerated to 48% growth, and Microsoft ‘s Azure, which grew 39% in their latest earnings. The analysts acknowledge that the law of large numbers contributes to the perceived lower growth rate of AWS compared to mega-cap peers; the comparisons still skew “unfavorably” for AWS. The firm also voiced concern that Amazon’s retail business could face a “structural disadvantage” if it doesn’t integrate AI platforms more deeply, such as ChatGPT and Gemini. Analysts said they had hoped Amazon would announce such integrations, but instead, management focused on its in-house assistant, Rufus, while pushing back timelines for participation in broader AI models. “It’s natural to want to turn on [Amazon]. I think it’s entirely possible that it goes to the $190s because it was such a jarring surprise,” Jim said. Amazon shares have lost 12% over the past 12 months. While Amazon’s strategy should ultimately pay off, investors should expect more volatility in the short term. On Thursday evening after the print, we reiterated our buy-equivalent 1 rating but lowered our price target to $250 per share from $275. During Friday on CNBC’s “Halftime Report.” Nvidia CEO Jensen Huang defended Big Tech’s surging capital expenditures, calling them “appropriate and sustainable.” Nvidia, whose chips are considered the gold standard for AI, is one of the major beneficiaries of that spending. We agree with Jensen. That’s why we upgraded our other Club chip stock Broadcom to a buy-equivalent 1 rating . While both Broadcom and Nvidia are in the red year to date due to the market rotation out of tech, we believe in both stocks. We still have Nvidia as a 2-rated hold. While the likes of Amazon and Alphabet are buyers of Nvidia chips, they are also emerging as competitors via their own custom chips. Asked in the CNBC interview whether he sees custom chips like AWS’ Trainiums as a threat, Jensen said he is not bothered. He said that no company can develop AI chips at the scale and quality like Nvidia. (Jim Cramer’s Charitable Trust is long AMZN, GOOGL, MSFT, META. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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