Trading was briefly halted due to volatility after the report was published in Reuters. A source familiar with the matter confirmed to CNBC that Amazon is in talks to invest in the company.
The Reuters report said that Amazon is interested in acquiring a minority stake in Rackspace, which helps companies shift their data to Amazon Web Services (AWS), along with other cloud services. Rackspace held its IPO earlier this month. Private equity firm Apollo Global Management took over the majority stake in Rackspace in 2016, and it's unclear if the companies will all agree to a deal.
The Reuters report said it could take months for Amazon to work out an investment deal with Apollo.
Amazon's AWS is the largest cloud business in terms of market share, followed by Microsoft's Azure cloud and Alphabet's Google Cloud. During the pandemic, cloud computing companies have seen a surge as more and more companies shift their operations online.
Apollo and Rackspace declined to comment. An Amazon spokeswoman also declined to comment.