Amazon stock just entered the danger zone

Amazon ( AMZN ) shares are in a late-summer funk, and it's getting uglier by the day.

Shares of the tech beast have now tanked by about 11% from August's all-time high. With the 2% decline on Tuesday, the stock finished the session below its key 100-day moving average per Yahoo Finance AlphaSpace data.

The stock has underperformed the S&P 500 ( ^GSPC ) this year, rising 10% compared to a 12% advance for the benchmark index.

Two factors may be at play in driving the pullback in Amazon.

For starters, on Tuesday, the Federal Trade Commission (FTC) and 22 states filed a lawsuit alleging that Amazon's advertising practices have overcharged its roughly 1.2 million advertisers by $20 billion from 2019 to the present.

The FTC contends it did this by way of undisclosed reserve-pricing mechanisms that ultimately increased costs for advertisers and consumers.

Amazon responded by saying advertisers are receiving greater value from its platform.

Whatever the case, investors are selling Amazon shares out of fear that a lucrative profit center for Amazon — advertising — may become less lucrative in the future.

"While we recognize the concern of an FTC suit, we would take advantage of any dislocation in shares given our view that advertisers continue to allocate greater spend to Amazon based on results, that AI demand trends at AWS are accelerating, continued retail tailwinds (as Agentic Commerce rises), and expanding profitability," Citi analyst Ronald Josey said in defense of Amazon's stock on the news.

Lingering concerns about how much Big Tech is spending on AI infrastructure are also not helping Amazon's stock

Recall that just a few short weeks ago, Amazon announced it is significantly expanding its full-year 2026 capital expenditures budget to approximately $220 billion.

And the aggressive spending is poised to continue.

"We now estimate Amazon's 2027 capex to be $320 billion, and its 2028 capex to be $370 billion. Accordingly, we now estimate negative free cash flow in 2027 and 2028 of approximately -$50 billion in each year," Evercore ISI analyst Mark Mahaney warned.

Brian Sozzi is Yahoo Finance's Executive Editor, host of the ' Power Players With Brian Sozzi' podcast and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi , Instagram , and LinkedIn . Tips on stories? Email brian.sozzi@yahoofinance.com.