Morgan Stanley analyst Brian Nowak recently released a bullish investor note for Amazon (NASDAQ: AMZN) and raised the price target on the company’s stock to $350 — more than 33% upside from its current price.
Amazon has significantly trailed the S&P 500 over the past six months as investors have questioned the broader artificial intelligence (AI) trade amid skyrocketing spending from tech companies. Amazon, for its part, says it will spend $220 billion this year on capital expenditures (capex), mostly for AI.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
How could all that spending be worth it for Amazon, and why might now be a good time to buy Amazon stock? It’s because the tech giant has significant long-term opportunities in AI chips and cloud computing.
Amazon remains the leading cloud computing company
Amazon is the leading cloud computing company, with its Amazon Web Services (AWS) taking 28% market share, according to Synergy Research Group. As AI has expanded over the past several years, companies need higher cloud computing capacity to run their new software and services.
The result is a 37% increase in AWS sales in the second quarter of 2026, and the business achieved $169 billion in annualized revenue. AWS is not just a fast-growing part of Amazon’s total business; it’s also highly profitable, bringing in $16.6 billion in operating income, with impressive operating margins of 39%.
AI cloud computing is poised to become a major part of the tech economy. Estimates from Goldman Sachs put the global AI cloud market at $2 trillion by 2030, as tech companies invest more in capacity.
Amazon CEO Andy Jassy has been bullish on AWS’ growth potential for a while, believing it could be worth $300 billion in a decade. But with the recent surge in AI cloud demand, Jassy now thinks AWS’ annualized revenue run rate could double that amount to $600 billion by 2036.
That growth potential should make Amazon’s current capex spending much more palatable for investors. It’s not that they should ignore spending, but with Amazon already a leading cloud company and successfully tapping into this massive market, I think it can continue to convert its AI capex into significant revenue.
AI chip sales are an increasingly important opportunity
Another catalyst for Amazon comes from the company’s custom Trainium AI processor. Amazon’s leadership said on the second-quarter earnings call that its custom processor revenue grew to an annualized revenue run rate of $25 billion.
