Amazon's AWS Growth Fuels Bullish Outlook Amid Capex Concerns

Amazon's AWS division has experienced its fastest growth in 18 quarters, driving a bullish outlook despite the company's stock price lagging behind the S&P 500. This significant growth is largely due to Amazon's heavy investment in capital expenditures (capex), with plans to allocate $200 billion by 2026.

However, this massive capex spending has led to near-term cash flow concerns and pressure on the company's stock price. Analysts remain optimistic about Amazon's prospects, projecting a 27% to 38% upside in the next year, with a long-term target of $500 per share by 2030 if AWS growth continues above 30%, free cash flow improves, and advertising plus custom silicon boost margins.

The main risk to this outlook is a potential slowdown in AI demand, which could impact returns on Amazon's massive capex investments. The company has partnered with Qualcomm to develop next-generation AI data center infrastructure chips, driven by its $496 billion backlog and plans to double power capacity.