Amazon's Booming AWS Business Raises Questions About Future Growth

Amazon shares have been lagging behind the S&P 500 in recent months despite its booming cloud business, Amazon Web Services (AWS), which has seen growth of 37% and is now at a $169 billion annualized run rate. AWS' growth, along with CEO Andy Jassy's guidance for a potential trillion-dollar annual revenue business for AWS alone, raises the question: can Amazon shares realistically hit $500 by 2030?

The current price target for Amazon is $328.17, and analysts are bullish, with 97% holding a buy rating. However, reaching $500 would require a gain of 93.4%, which is a significant stretch. The market needs to see meaningful growth in earnings, free cash flow, and multiple expansion.

AWS' growth is a key factor in Amazon's future success, with Jassy stating that AWS 'added over $4.6 billion in revenue quarter over quarter' and has a $496 billion backlog. Additionally, the chips business has an annual revenue run rate of over $25 billion, growing triple-digit percentages year over year.

However, there are risks associated with Amazon's growth strategy, including AI capex overshooting demand and depressing returns on invested capital for years.