Amazon Stocks Surge Amid AI-Driven Growth in AWS Cloud Unit

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ago 9 hours

Amazon Stocks Surge Amid AI-Driven Growth in AWS Cloud Unit

Amazon’s stocks have surged over 11% in early trading as of October 31, 2023. This increase comes amid strong growth in its Amazon Web Services (AWS) cloud unit and a positive sales outlook, alleviating concerns about the tech giant’s position in the artificial intelligence (AI) sector.

AWS Growth Highlights

The revenue from AWS rose by 20% in the third quarter, showcasing the impact of Amazon’s investment in AI. Although competitors like Microsoft Azure and Google Cloud reported larger revenue growth—40% and 34% respectively—AWS’s overall revenue of $33 billion significantly outpaces Google’s $15.16 billion.

Revenue Growth:
- AWS: 20% increase
- Microsoft Azure: 40% increase
- Google Cloud: 34% increase
AWS Revenue Compared to Competitors:
- AWS: $33 billion
- Google Cloud: $15.16 billion

Market Reactions

Wall Street has reacted positively to AWS’s performance, which some analysts view as a turning point for Amazon. Concerns regarding AWS losing market share to competitors have been addressed, with many now optimistic about a boost in the fourth quarter or early next year.

Until this recent surge, Amazon shares had only improved by 1.6% in 2023, which positioned it as the underperformer in the “Magnificent Seven” group of tech companies. The rise on Friday allowed Amazon to surpass both Tesla and Apple in year-to-date gains, with Tesla growing approximately 11% and Apple around 8%.

CEO Insights

Amazon CEO Andy Jassy commented on the company’s growth, stating that AWS is experiencing a revival not seen since 2022, driven by rising demand for AI and core services. In response to this demand, Amazon is expected to increase its capital expenditures next year.

Strong Performances Across Businesses

In addition to AWS, Amazon’s retail and advertising sectors also posted impressive results. The retail division grew by 11% year-over-year, a remarkable figure among major U.S. retailers, while the advertising segment saw a 24% increase, reaching $17.7 billion in sales. This growth is largely attributed to expanded ad placements across various platforms, including Echo devices and grocery listings.

Analyst Perspectives

Market analysts have responded favorably to Amazon’s performance, with at least 23 brokerages raising their price targets for the company’s stock after the earnings report. As of now, Amazon’s forward 12-month price-to-earnings ratio stands at 29.63, outperforming Alphabet’s 25.98 yet trailing behind Microsoft’s 31.72.