Morgan Stanley Raises Amazon Price Target to $350, Citing AWS AI Profitability

Amazon Stock Performance

Amazon's stock reached a record high of $284 per share on August 3, marking a nearly 45% increase from its 52-week low in February. However, the stock has since declined by over 7%.

Morgan Stanley's Outlook

Analysts at Morgan Stanley added Amazon to their top picks list and raised their price target to $350 from $335. This new target implies a 33% upside from Monday's closing price.

Q2 Earnings and AWS Strength

Amazon's second-quarter results were strong, with its Amazon Web Services (AWS) cloud business surpassing sales and operating income expectations. This performance contributed to the stock's earlier rally.

CEO Commentary on AI Profitability

CEO Andy Jassy's remarks on the Q2 earnings call significantly impacted investor sentiment. He discussed the three-decade usable life of data centers and the profit dynamics of hardware, noting that servers have a useful life of at least five to six years and AI capacity is contracted for at least five-year terms. Jassy stated that this drives significant free cash flow on servers and network equipment within two to three years after breaking even.

Market Impact

Jassy's comments on July 30 were market-moving, leading to a more than 15% surge in the stock on July 31 and an additional 4.5% on August 3, reaching its record high. These statements underscored how Amazon's AI investments are expected to generate returns.